In the further period of the season, the world cotton prices can be influenced by cotton exports ban introduced by India on 5 March this year. It seems that thanks to a huge surplus (being ca. 3.7 mln tonnes, this season) of the world cotton production over the world consumption the Indian cotton missing in international turnover should not cause any significant rise of prices. The Indian exports’ ban can however hinder the cotton prices’ dropping tendency. Exports of Indian cotton was in 2/3 directed to China, and most probably – to its stocks which the Chinese government decided to restore from the level of ca. 2 mln tonnes to more than 4 mln. So, the situation may depend on the fact whether China will be consistently realizing its intention to rebuild the stock. If it will, then, additional volume of cotton from other markets will be sucked in by China and this could have an impact on cotton prices in the later part of the season. A possible shortage of cotton on the Chinese market may raise the production costs at the Chinese textile and apparel manufacturers’ (including also those of them who relocated manufacture from their home countries to China).
The cotton exports’ ban from India puts the Indian textile and apparel manufacturers in a privileged position, as the excess of raw material will in the course of time contribute to lowering of its prices on the local market and this, in turn, will allow cutting manufacture costs and will facilitate Indian competition on the global market.
The only certain effects which this decision will bring, will be another confusion on the world cotton market, such as breaches of trade agreements and contracts, disturbances of production plans in textiles’ and clothes’ manufacture process in many companies as well as negative financial consequences resulting from all of these.
Such types of decisions undermine not only India’s position as a reliable trade partner, but also the belief in the chance of obeying the international trading rules required by the WTO.
By the way of these considerations, a question arises whether this ban will be upheld for a longer time? After all, this season cotton production in India is ca. 5.9 mln tonnes whereas the consumption is ca. 4.4 mln tonnes. In what way is India going to make use of 1.5 mln tonnes of cotton?
Gdynia Cotton Association