Cotton price hits decade high

With just a little break, cotton prices have again started to go up in international markets, mainly because of increased imports by China, the largest consumer worldwide, and a rise in demand following the reboot of economic activities across the globe.  

Every pound of cotton was traded at $1.06 – the highest in the last decade, according to the New York futures market. Earlier in 2010, the price reached $1.6 per pound. 

Besides, cotton prices registered a 35% hike over the last 10 months.

The rise in prices of cotton, the key raw material for making clothing items, will have a ripple effect on yarn prices, eventually disrupting apparel shipments, said industry people.

While talking to journalists on Tuesday, Mohammad Ali Khokon, president at Bangladesh Textile Mills Association (BTMA), said proforma invoices that they will issue for November to sell yarns might see a 15% hike in prices.

A proforma invoice is a preliminary bill or invoice used to request payment from the committed buyer for goods or services before they are supplied.

That is why he has requested apparel exporters to keep the additional cost on yarn purchases in mind while negotiating prices with buyers.

Shahidullah Azim, vice-president at Bangladesh Garment Manufacturers and Exporters Association, however, told The Business Standard that if cotton prices increase in the global markets, yarn prices in Bangladesh should rise at least after three months. 

It will not be logical to hike prices before that, otherwise, apparel makers will have to go for imports instead of sourcing domestically, they added.

"If we cannot survive, they [spinners] will not too," he said.

Khorshed Alam, chairman at the Little Star Group, said a rise in global consumption of cotton following the reopening of economic activities globally has led to a rise in its prices.

Besides, China is now stocking up on a big amount of cotton to meet their future needs, maybe foreseeing any possible crisis, he also said. 

"When I was negotiating with an Indian supplier for importing 200 tonnes of cotton, its price went up by $.02 per pound," he added. 

Prices of cotton had been rising worldwide since the beginning of this year, leading to a surge in yarn and fabric prices. 

Prices of cotton had been rising worldwide since the beginning of this year, leading to a surge in yarn and fabric prices. 

RMG entrepreneurs have claimed that local spinning mills have been charging much higher than in the global market, while spinners have repeatedly clarified that they hiked prices in line with cotton prices.

Both the parties, however, recently reached an agreement on pricing of yarns.

In FY21, Bangladesh, the second largest exporter, earned around $39 billion in merchandise exports, of which apparel items accounted for over 31 billion. The country also stands at the second position in cotton imports as in the last fiscal year, it imported over 8 million bales of cotton, mainly from African countries.