Falling global cotton price hits local manufacturers

The falling price of cotton on the global market is exposing local manufacturers to losses as they have purchased the material at higher prices and thus cannot sell finished products for a profit, an industry source said.

The falling price of cotton on the global market is exposing local manufacturers to losses as they have purchased the material at higher prices and thus cannot sell finished products for a profit, an industry source said.

Nguyen Hong Giang, secretary general of the Vietnam Cotton and Spinning Association, told the Daily via the phone last Friday that the cotton price in New York has slid to around US$3 a kilo from US$5 in March.

Giang said the sharp fall of the cotton price since the first quarter has been causing difficulties to local yarn manufacturers who have to import 80% of materials to make yarn for export. Normally, each of them has to keep in stock a few thousand tons of cotton in advance before accepting export orders.

“The import price, inclusive of cost, insurance and freight, has dropped from US$4.2 per kilo when the contract was signed to nearly US$3.2 when the cargo arrived in the storehouse in Vietnam that took nearly one month. After production, the yarn currently has the new sales price at only US$3.9 per kilo and that explains why many yarn manufacturers incur losses,” he said.

Truong Ho Long, director of the yarn company Dong Phat in Hanoi, said the cotton price fall not only caused losses but also made his business stagnate as buyers waited for the price to fall further.

According to the General Statistics Office, the local yarn industry has imported 185,000 tons of cotton worth US$640 million in the year’s first half, down 2% in volume but almost twice the value of that in the same period last year. – SGT

Tags: cotton prices