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

1. Cotton price indices rise further during October to mid-NovemberCotton price indices rise further during October to mid-November

The price indices of cotton rose in early October, and then stayed relatively stable till early November, before going up again in mid-November. The CC Index 3128B, for example, went up from 14,866 on 30 September to 15,419 on 11 October, and hovered between 15,289 and 15,419 in the following weeks. In mid-November, the index rose again to reach a two-year high of 15,799 on 18 November (see exhibit 1).

In our view, the increase in domestic cotton prices was due largely to a tight supply of cotton caused by a delay in the arrival of new cotton crop and the end of government’s auction of cotton reserves in late September, and a strong restocking demand from downstream textile manufacturers, whose inventories dropped to low levels.

Going forward, the downstream demand for cotton from textile manufacturers is likely to stay strong. Meanwhile, the domestic supply of cotton is expected to remain tight. All in all, we expect the cotton prices to stay around the current high levels in the near future.

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Content provided by Fung Business Intelligence
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