Cotton Prices Reach 10-Year High...Concerns Over Rising Clothing Costs

"US-China Conflict Behind the Rise in Cotton Prices"

(Photo by Bloomberg)

[Asia Economy Reporter Yujin Cho] As cotton prices have risen to their highest level in 10 years, concerns over rising clothing prices are growing, the Wall Street Journal (WSJ) reported on the 5th (local time).

On that day, the price of U.S. cotton futures traded on the Intercontinental Exchange (ICE) closed at $1.0893 per pound, up 3.8% from the previous day ($1.0493). This is the highest level since September 2011. Cotton futures prices have risen 22% over the past 11 trading days.

The WSJ reported that as cotton prices rise in the United States, the world's largest cotton producer, pressure to raise clothing prices made from cotton as a raw material is increasing.

While prices of commodities such as corn, wheat, and lumber are rising due to abnormal weather and supply chain bottlenecks, the rise in cotton prices stems from U.S.-China tensions.

In January this year, the U.S. Customs and Border Protection (CBP) under the Department of Homeland Security during the Donald Trump administration imposed a total ban on imports of cotton products from the Xinjiang Autonomous Region, which are alleged to be produced using forced labor of the Uyghur people.

The import ban covers not only raw cotton from Xinjiang but also cotton fabrics and clothing. Products processed from raw materials in third countries are also subject to the import ban.

China is the world's second-largest cotton producer, and about 85% of Chinese cotton is produced in Xinjiang. In 2019, China exported a total of $50 billion worth of cotton and cotton fabric-related products to the United States.

From the perspective of Chinese clothing companies, using Xinjiang cotton blocks access to U.S. exports, so they began seeking alternatives, which ultimately caused a surge in demand for U.S. cotton.

According to the U.S. Department of Agriculture (USDA), China's exports of U.S. cotton have increased by 83% since last August. China is also known to have increased imports of Indian cotton in addition to U.S. cotton.

Peter Egli, risk management officer at Plexus Cotton, said, "If Xinjiang cotton cannot be used, more cotton and yarn must be imported from other regions." He added that China is meeting its cotton demand from major exporters such as India.

China's cotton consumption is expected to reach 41 million bales (1 bale = 218 kg) this year due to increased demand for consumer goods following the COVID-19 pandemic. This represents a 24% increase over the past two years.

However, there is also a positive outlook that China's cotton demand will decrease for the time being. The recent power shortage crisis in China is expected to limit the rise in cotton prices as it leads to reduced demand for raw materials including cotton.

Julian Evan Pritchard, chief China economist at Capital Economics, said, "China's power shortage will shrink manufacturing activity and restrict industrial activity due to factory shutdowns."

This content was produced with the assistance of AI translation services.