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China Sourcing Update: Prices of Natural Textile Materials (Nov 2017)

1. Cotton price indices rise and then fall in November

The price indices1 of cotton edged up in early November and declined afterwards. The CC Index 3128B, for example, went up from 15,998 on 31 October to a five-month high of16,016on 6 November before dropping to 15,860on 30 November(see exhibit 1).

In our view, the main reasons for the fall in cotton prices in the month were an abundant domestic supply of cotton, as more cotton from Xinjiang had arrived in market; and a weak restocking demand from downstream textile manufacturers. Moreover, the Chinese government announced on 6 November that it will sell its cotton reserves again from 12Marchto the end of August 2018,2 thus putting further downward pressures on cotton prices in the month.

Going forward, the domestic supply of cotton is expected to remain abundant and the downstream demand for cotton is likely to stay soft in the foreseeable future. Therefore, we expect cotton prices to decline further in the near term.


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Content provided by Fung Business Intelligence
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