There’s No Better Time to Meet Your Partners in Asia
Global Summit Preview: Southeast Asia
April 12, 2012
Asia has always been essential to the global cotton business and is only becoming more important, as evidenced by the growing fields in India and the expansion of existing mills and emerging new players in Southeast Asia, where the main costs of production (labor and electrical) are still among the cheapest in the world. Asia’s economies are still growing, albeit slower than before, and some parts of the region have yet to feel the impact of the global crisis. This situation has temporarily shifted global investment and business activity to Asia.
But opportunities rarely come without their share of challenges. In our opinion, the current challenge for the cotton industry in Asia is competition with synthetics. The volatility of cotton prices has left many spinners with a stock of high-priced cotton, contract defaults and cash-flow problems. In order to continue production, many have chosen to shift to the locally available, lower-cost synthetics. As a man-made fiber with uniform characteristics, synthetics are easier to produce and handle than cotton, resulting in lower capital requirements and production costs. Our recent survey of Indonesian spinners sums up the situation: Mills’ expensive cotton inventories, coupled with higher production costs and relatively low retail price elasticity in many developing Asian countries, make it difficult for spinners to continue their operations. Some spinners have shifted to spinning synthetics exclusively, while others increased their use of synthetics and only use cotton as a blend (or when they get an acceptable price offer for cotton yarn). The availability of cotton products in the market is sporadic at best, resulting in retailers preferring to fill their shelf space with the more consistently available, and cheaper, synthetic-made apparel.
We are even confident to say that in Indonesia and other Southeast Asian countries, market share shows a significant decrease in cotton and a major gain in polyester. As a result of these market developments, the Cotton International 2012 Global Summit couldn’t be held at a better time, or in a better place than Bangkok. It’s high time that the global leaders of the cotton industry meet in Asia to see things firsthand and discuss current events with their Asian partners.
Despite the challenges mentioned previously, it is obvious that the Asian market is still active. There are opportunities here for those ready to take advantage of them.
As an industry, we need to reach a new level of cooperation to ensure there is a continuous and mutually beneficial way to supply consumers with the world’s most desired fiber: cotton.