Following Surge in Raw Material Prices, Cotton Content Declines in Denim

7/28/2015
World exports of denim fabric with a cotton content of less than 85 percent trebled over the five years to 2014, according to a report in the latest issue of Global Apparel Markets from the business information company Textiles Intelligence.

As a result, they reached a record high of $1.7 billion. At the same time, exports of denim fabric with a cotton content of 85 percent or more declined over the five-year period, to $2.9 billion.

The apparent shift in production to denim fabric with a cotton content of less than 85 percent was in response to a surge in the price of raw cotton in 2010 and early 2011, which led manufacturers to use a smaller proportion of cotton in their denim fabric products in order to control costs.

As a result, the share of world denim fabric exports accounted for by fabric with a cotton content of 85 percent or more fell from 83.9 percent to 62.7 percent between 2009 and 2014, while the share of denim fabric exports accounted for by fabric with a cotton content of less than 85 percent increased from 16.1 percent to 37.3 percent.

In China -- the world's largest exporter of denim fabric with a 36 percent share of world exports -- the shift to fabric with a cotton content of less than 85 percent was much greater than the shift towards such fabric globally.

Indeed, fabric with a cotton content of 85 percent or more accounted for only 35.2 percent of Chinese denim fabric exports in 2014 -- down from 72.1 percent in 2009. By contrast, the share of fabric with a cotton content of less than 85 percent increased from 27.9 percent to 64.8 percent.

This reflected the fact that domestic raw cotton prices in China in 2013 and early 2014 were higher than world prices.

In the second half of 2014, however, there was a fall in the domestic price of cotton in China following a change in Chinese government policy. Furthermore, the Chinese government announced in June 2015 that it planned to start selling off a large portion of its stockpile and this is expected to reduce domestic prices further.

As a result, Chinese exports of denim fabric with a cotton content of 85 percent or more -- and, indeed, world exports of such fabric -- could rebound somewhat in the coming years provided the price of raw cotton remains low.

That said, the average price of crude oil has also fallen sharply and this should help synthetic fibre producers to maintain low prices and hence remain competitive.

Consequently, provided crude oil and synthetic fiber prices remain low, trade
in denim fabric with a cotton content of less than 85 percent should also remain buoyant.
X
This ad will auto-close in 10 seconds