Mainland cotton exports to gain from small price rise

Reduction in plantation area will boost fabric and yarn costs in the second half

An anticipated moderate rise in China's cotton prices this year will spark a rebound of cotton textile exports and benefit mainland and Hong Kong firms ravaged by price volatility last year.

Prices are expected to be 'relatively high' in the second half, as China's plantation area will shrink 10 per cent to 12 per cent this year, according to Kim Eng Securities.

Cotton prices in China would rise 'an acceptable amount' to 13,000 yuan per tonne later this year from 11,000-odd yuan per tonne, predicted Zhang Bo, chairman of Weiqiao Textile, China's largest cotton-textile company.

'A steady growth benefits cotton-textile companies like us, because we can sell at higher prices, but price volatility hurts everyone in the industry,' Mr Zhang said. 'This year's price increase won't be so high as to squeeze textile and garment firms.'

He said higher cotton prices and the end of global textile quotas in January would significantly boost Weiqiao's exports to the United States and the EU this year. Last year, the mainland firm's exports to the US and Europe jumped 180 per cent to account for 9 per cent of its turnover of 11.09 billion yuan.

'The end of quotas will benefit us, as we no longer have to pay for quotas to export to the US and EU, thus lowering the cost of our exports. As the EU and US are high-end markets, they yield higher profit margins,' Mr Zhang said.