Business

China's Cotton Consumption To Fall By 1 Million Tons In 2019-20

The rapid spread of Covid-19 in all the countries has led to a cancellation of apparel export orders in China's factories. US and European retailers have shut their stores. US and Europe have sealed their borders, with the result that trade is hampered. China's textile and garment factories are unwilling to take the few orders that are coming their way for fear of later cancellations. They believe that new export orders will be much fewer in the coming months, with May and June being the worst. Thus, China's cotton consumption is bound to see a considerable reduction of 0.6-1 million tons in 2019-20. This was reflected in the cotton futures market in China. The most actively traded May cotton contract dipped below 10,000 yuan/mt on Zhengzhou Commodity Exchange in the afternoon of March 24, once to the lowest of 9,935 yuan/mt, which was close to the historical low of 9,890 yuan/mt and has declined by 4,515 yuan/mt from 14,450 yuan/mt appeared on January 14 before the Chinese Lunar New Year. Affected by the export orders, China's domestic cotton consumption is expected to fall by nearly 1 million tons soon. If the state cotton reserves do not prolong, the stock/consumption ratio is forecast to 55%, up 7% from previous season. Global cotton consumption may also see large reduction with the ongoing pandemic.