News from the cotton and fibre world
Chinese cotton reserve sales to attain a normal level within five years
As scheduled, the Chinese government’s auction of state cotton reserves began on May 3, 2016. The auction results during its first week showed a high purchase rate of 99.9 % with 120350 metric tons (MT) sold. Imported cotton was fully sold and accounted for 77 % of the total volume auctioned. This indicates a serious shortage of high-grade cotton for China’s textile sector.
By comparison, with 120350 MT already sold during the first week of the 2016 auction, the Chinese government has almost doubled the total volume sold during all of 2015. This year’s high purchase rate, compared to the low 3.4 % purchase rate in 2015, is expected to further temper demand for cotton imports. The government’s control on the issuance of additional import quotas for cotton is already expected to reduce MY15/16 China’s cotton imports to 1.1 million MT (MMT), the lowest level in 13 years.
Out of the 121165 MT offered, 120350 MT were purchased by spinners. However, some traders were also involved in auctions mainly to source imported cotton as some of them see a recovery in global cotton prices. Of the total volume purchased, 2,671 MT were domestic cotton and 92679 MT were imported cotton.
Industry sources reported that imported U.S. and Australian cotton were the most popular during the auctions and were also purchased at a higher price. Based on the government’s plan, the daily offered volume will be about 30000 MT. The auction is scheduled to continue until the end of august 2016. As previously reported, the Chinese government plans to reduce the government cotton reserves (estimated at 11-11.2 MMT at the end of March 2016) to a “reasonable level” in five years.
Global cotton production and consumption rise in 2016-17
USDA’s first detailed forecasts for the 2016/17 marketing year indicate substantially higher production, alongside a more muted increase in consumption, but still yielding the second consecutive year of declining global stocks
Nearly the entire decline in stocks is forecast to occur within China, as reserve sales in the upcoming year and recovering mill use lead to a 6.6-million-bale reduction in stocks.
Outside of China, stocks are expected to rise slightly after a year when stocks in many major exporters, other than the United States and Australia, have become very tight.
Global trade, meanwhile, is expected to slacken slightly as Pakistan’s production recovers and China’s reserve sales continue, while growth in major importers such as Vietnam and Bangladesh slows slightly.
The recovery in consumption is based on continued growth in Vietnam and Bangladesh and a resumption of growth in China.
On the production side, the extraordinarily poor conditions which reduced yields in Pakistan, parts of India, and the Southeastern United States are not expected in 2016/17. in smaller producers, such as Egypt, Turkmenistan, Turkey, and some West African countries, production is forecast under more favourable conditions and up from 2015/16.
This higher forecast production, alongside supplies made available from China’s state reserve, is expected to pressure world cotton prices in 2016/17 and therefore enable more yarn spinning.
NCC Disputes findings in Turkish cotton anti-dumping investigation
On April 16, 2016, the Turkish government released its final decision on its anti-dumping investigation of U.S. cotton. Based on assertions that U.S. cotton was dumped into Turkey injuring the domestic fibre market – which NCC, the National Cotton Council steadfastly challenged – a three percent CIF (cost, insurance and freight) duty has been imposed on all U.S. cotton fibre imports into Turkey, effective immediately
Turkey is the second largest export market for U.S. cotton with shipments ranging between 1.5 and 2.0 million bales. The duties automatically put U.S. cotton at a competitive disadvantage to cotton produced in other countries, thus seriously jeopardizing business with Turkish mills.
NCC Chairman Shane Stephens said the investigation, which was initiated in October 2014, was clearly in response to several U.S. trade investigations of Turkish steel imports. He noted that the Turkish government self-initiated the investigation without any showing of special circumstances as is required under WTO, the World Trade Organisation rules. The Council is exploring ways to reverse the decision.
Synthetic fibres and cotton price, their applications, added value determine growth of market share
Cotton and synthetic fibres are in permanent competition regarding their application for industrial production. Cotton has properties like naturalness and complete biodegradability which synthetic fibres cannot offer. Furthermore, cotton is a renewable resource, which also is not true for chemical fibres. But the synthetic fibre industry argues with product properties that are developed in research laboratories in order to improve these fibres´ utility. Apart from the price, such properties play an essential role in the discussion about competitiveness and marketing of the materials. Bremen Cotton Report has conducted an interview with Bruna Angel, Fibre Expert with PCI Wood Mackenzie, and we present her major findings.
She explains the position of the synthetic fibre industry. PCI is one of the most renowned market research institutes for the chemical industry, polymers and fibres, with branches in every continent. The approach regarding innovation research and aspects of marketing of the resulting added value might also be exemplary for the further development of the cotton industry.
Does the price alone determine the competition between Synthetic fibres and Cotton or are there other criteria to observe?
“The price relations- hip of synthetic fibres compared to cotton is clearly an important global measured variable in the competition between the fibres. This was particularly noticeable in the years from 2009 to 2011 with big price pushes for cotton, which led to short-term profits for the cotton industry but also to growing competitive pressure in relation with synthetic fibres. The price of raw materials is especially import- ant on the level of the spinning mills, but the price of yarn and raw fabric is of much greater importance for the downstream levels like weaving and confection in relation to cotton consumption, thus it is not just about the price of cotton. From a global perspective, manufacturing quality and availability of fibres are also important, as is of course, last but not least, end consumer demand.”
What are the Consequences of the regulatory policy in China?
“In China, the fixation of cotton prices by the government at a level above that of world markets in the past has led to cotton becoming too expensive for the spinning mills in the country. This has been one reason among others for the accumulation of large state reserves that are only now beginning to melt away again. China has more than 64 percent of the worldwide capacities for synthetic fibres, ultimately also because the polyester production has been expanded. Polyester is cheaper than cotton, which is why China has invested large amounts in mill complexes and textile production in Vietnam, where production for cotton is cheaper than in their own country. In this way, China would indirectly profit from the advantages of the Trans-pacific partners- hip (TTp) when it comes into force. By now, Vietnam has become one of the biggest importers of cotton for textile and clothing production. Moreover, the production of cotton and textiles in China has shifted to the province of Xinjiang to the disadvantage of other provinces, causing great logistic challenges. Cotton has its advantages as a renewable natural product. Synthetic fibres usually convince with many useful technical properties, as known, for example, from the sector of performance sports.“
Has the cotton industry, together with the producer of textiles and clothing, neglected to develop functional properties and to market them in their products?
“Cotton doubtlessly has attractive properties. I would not say that the cotton industry has made grave mistakes in this field. After all, you can also create functional proper- ties by finishing natural fibres. It seems crucial to observe in which direction consumer demand goes. If you watch the buying behaviour of, for example, young women, you will notice that they mainly buy what they like. The material does not really play an important role in this connection. They are oriented towards fashion, outfit trends and images as promoted in their social media communities. Big advertising campaigns in traditional print magazines as we used to know them are no longer effective because the information behaviour of young target groups is changing completely. The fashion in the sec- tors outdoor and fitness, where the added value for the consumer is obvious via its function, still has great influence on changes in consumer behaviour. Here, products made of synthetic fibres are sold mostly, at least in the segment of jackets and tops. The same can be said about products for usage in the household sector or in the household and home textile industry. A variety of products made of fine merino wool for functional garments and outdoor clothes from sport and leisure brands shows that added value can become as obvious for natural fibres. Products with similar properties are also known from the cotton range. Currently, though, the sector is still dominated by clothes made of synthetic fibres. People used to say that there were differences in the regional demand or in consumer preference regarding the choice of material, but the differences are vanishing at present.”
While cotton is completely bio-degradable, Synthetic fibres are not. How do you answer this criticism?
“It is wrong to say that synthetic fibres are generally not bio-degradable. For example, PLA (polyl- actic acid) is a type of polyester that comes from renewable plant resources, and it is biodegradable. Artificial or regenerated fibres like viscose are also biodegradable, and their market share for the use in clothes is currently rising, also because they are in fashion. It is undoubtedly true that oil-based fibres like polyester and plastic products and packaging are not biodegradable. They lead to environmental degradation at the disadvantage of people because disintegrating micro particles in soils and waters enter the food chain of humans and animals. The resulting dangers are by now coun- tered with the help of a growing recycling industry and recyclable plastics. in the long run, it should also be possible to solve the problems caused by micro particles from fibres or cosmetic products being washed out in the laundry and getting into the water cycle.
What significance does pet recycling have today?
“The global market share of plastics and synthetic fibres from recycling amounted to 14 % to 15 % in 2014. Non-woven fabrics and do not need to meet special function requirements. This becomes important, though, when factory-fresh fibres are mixed with recycled material. The usage volume of staple fibres from recycled polyester are currently rising in spinning as the technology has been making progress and the collection, sorting and cleaning processes have been improved. The use of recycled filament for industrial utilisation is much smaller because of the high technical requirements on fibre quality, also because certified standards are demanded for these products.”
Where do mixtures of natural and synthetic fibres go together well, respectively where do they complement each other?
“Wherever cheaper product offers are necessary, mixtures of natural and synthetic fibres are put to use, with few exceptions. Mixtures are especially important wherever stretch materials are needed. In the sector of trousers and jeans, they provide the optimum fit and comfort. Such mixtures can be equipped with temperature regulation properties and add to durability in workwear. In work clothing for hospitals, they provide better protection against the spread of germs. Mixtures of viscose and cotton afford improvements in the area of optics, hand feel, aesthetics and firmness of materials. These are just some examples of mixtures that go together well.”