Global prices of raw cotton almost doubled between April 2020 and November 2021, after a period of decline resulting from mill closures and declining retail demand stemming from social distancing measures put in place to combat the spread of COVID-19. The hike can be attributed partly to continued trade tensions with China and a US ban on imports of cotton grown in Xinjiang province, China, in response to allegations that Uyghur Muslims were being subjected to serious human rights abuses. Despite the hike in raw cotton prices, US apparel import prices were down in 2021. However, there were indications towards the end of 2021 that import prices were beginning to rise and this is likely to continue into 2022.
In October 2021 alone, for example, US import prices were up compared with 2020 as a whole in the case of yarn and apparel, and up sharply in the case of cotton textiles and cotton apparel. One key question is why the price of cotton increased when it did--given that demand in 2020 was weak with economies in lockdown, and in 2021 the industry was affected by shipping problems. However, government stimulus programmes were pumping money into economies around the world and setting the stage for inflation to creep into supply chains.
Also, China purchased more US cotton in 2021 than it did in 2020 in order to meet the needs of mills that were looking to avoid using Xinjiang cotton. Additionally, demand for apparel rose in 2021 and so did US apparel imports. Admittedly, the jump in the cost of cotton for, say, a pair of jeans is small relative their wholesale price. But each stage of the supply chain--spinning, weaving and knitting--will try to add a little more to the prices they charge for their products, resulting in a cumulative increase in cost for apparel companies.
Table of Contents
- INTRODUCTION
- FACTORS BEHIND THE COTTON PRICE HIKE
- DO RISING COTTON PRICES HARM APPAREL COMPANIES?
