Production at Lowest Despite 57% Rise from Last Year's Low... Clothing Prices Expected to Increase
[Asia Economy Reporter Yujin Cho] The fashion industry, which had been struggling with poor performance due to the impact of the novel coronavirus infection (COVID-19), has fallen into distress after facing the compounded adversity of a sharp rise in cotton prices.
According to the cotton price index A Index from Cotton Incorporated on the 13th, cotton prices surpassed 70 cents per pound in December last year and rose to 79.77 cents (as of the 8th) this year. This is a 57% increase compared to the low point in April last year. The outlook is even worse. The International Cotton Advisory Committee (ICAC) forecasts that global cotton production will hit its lowest level in four years this year.
The rise in cotton prices is due to increased supply and demand risks caused by the COVID-19 impact. A textile industry official said, "The textile, knitting, and cotton finishing companies have collapsed due to the COVID-19 recession, causing supply and demand confusion. Additionally, the emergence of speculative forces due to the U.S. import ban on cotton products from the Xinjiang Uygur Autonomous Region, which accounts for most of China's cotton production, has caused market turmoil." Informal bans on Australian cotton, the world's third-largest cotton exporter, are also cited as factors exacerbating cotton price instability.
Large fashion companies are securing sufficient inventory by diversifying suppliers, but small fashion companies face different circumstances. A fashion industry official explained, "The increase in cotton prices is more pronounced in low-grade cotton than in high-grade cotton, so this sharp price surge will hit small fashion companies harder," adding, "Other clothing materials such as buttons and zippers are also experiencing difficulties due to supply instability."
The rise in cotton prices has made clothing price increases inevitable. A Samsung C&T Fashion Division official said, "Since the procurement of clothing raw materials is done 6 to 12 months in advance, it will not immediately affect prices, but in the long term, clothing price increases are unavoidable." Underwear companies that use a lot of cotton materials are also expected to raise prices soon. A BYC official said, "We are reviewing the possibility of product price increases due to the rise in cotton prices."
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