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China Sourcing Update (Prices of Natural Textile Materials) Nov 2016

1. Cotton price indices rise further in November

The price indices of cotton trended upward in November. The CC Index 3128B, for example, went up from 15,358 on 31 October to a two-year high of 16,019 on 29 November, before closing at 15,999 on 30 November (see exhibit 1).

The main reasons for the increase in domestic cotton prices in the month were a tight supply of cotton caused by a delay in the transportation of cotton from Xinjiang to other regions, and a strong restocking demand from downstream textile manufacturers.

Going forward, the downstream demand for cotton from textile manufacturers is expected to remain strong in the near future. Meanwhile, the domestic supply of cotton is expected to increase as more Xinjiang cotton will arrive markets soon. Moreover, the Chinese government announced on 22 November that it will sell its cotton reserves again from 6 March to the end of August 2017. 2 The market expectations of the rise in future supply of cotton are likely to put downward pressures on cotton prices in the short term. All in all, we expect the cotton prices to fall in the near future.

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Content provided by Fung Business Intelligence
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