Agri Business

Lockdown impact: Cotton trade faces major shake-up, says ICAC

Rutam Vora Ahmedabad | Updated on June 09, 2020

Global body hints at shrinking consumption leading to record stock-to-use ratio

Cotton trade across the globe is likely to witness a major revamp following the Covid-induced lockdowns.

Facing cancellation in export orders, many textiles and apparel companies and retail companies have started filing for bankruptcy, while cotton merchants in affected nations face a risk of contract cancellations and market losses.

This, according to the International Cotton Advisory Committee (ICAC), portrays a grim prospect for the global textiles and apparel industry in the short term.

In its latest report ‘Impact of the COVID-19 Lockdown on the Cotton Market’ released Tuesday, ICAC has noted that the global cotton market is affected by fundamental factors of supply and demand and has been impacted by the Great Lockdown resulting from the pandemic.

It also projected that the global cotton consumption for 2019/20 is currently estimated at 23 million tonnes from the additional pressure of containment measures and the continual pressure of global trade tensions.

“With decreasing use, ending stock levels are expected to rise to 21.8 million tonnes with the stocks-to-use ratio at record high levels,” it noted while underlining the weak price outlook.

“Cotton prices will remain under pressure due to several factors, including higher ending stocks in the current and next season, weaker textile fibre demand from brands and retailers, and lower polyester prices,” it added.

Recovery scenarios

ICAI expressed two possible recovery scenarios. A moderate recovery could be possible with a “new normal” under the changed safety norms and government’s responses and policies for businesses and economic activity to reopen.

Whereas there is a possibility of a slower recovery under stringent containment measures, which remain in place at several hotspot areas and the government policies including those for public health systems, small business and unemployment remain weak or ineffective. It could lead to a more severe contraction in cotton mill-use in 2021.

Published on June 09, 2020

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