The misconception that cotton price is linked with the price of local polyester staple fibre is creating a grave situation these days. In essence, the whole notion is completely off-base and fundamentally incorrect. Domestic cotton price mechanism deals with its own agri-based fundamentals, mainly cotton production prospects such as crop yield, weather etc or the impact of international prices, of course with the supply-demand dynamic in the loop.
In contrast, however, PSF prices are influenced by petrochemical dynamics - chiefly the price of its raw material ie PTA, which has historically moved in tandem with international oil prices. Amid 41 percent slide in international oil prices on year-on-year basis, PSF prices plunged by 5 percent during Jul-Sep 2009 over the same period last year, where on a month-on-month basis the price of PSF eased by 4 percent in October.
On the contrary, cotton prices surged 4 percent in October on a month-on-month basis. Since, there is no relationship between the two, as hoarding and supply constraints are the real issue behind cotton price hike rather than PSF prices, its time for local textile manufacturers to start focusing on the core issue at one end and at the other start capitalising on low priced polyester.
And they must do so soon. With the price of PTA - PSFs key raw material - increasing by 12 percent in international markets since last month, local PSF prices look set to rise. Although, domestic PSF manufacturers haven raised prices as yet, it will be little time before they jack up prices - possibly within a week - and pass on the impact to buyers.
For textile manufacturers - especially those involved in blended yarn - this is a small window of opportunity to at least partially offset the impact of costly cotton and the likely hike in domestic PSF prices going forward.
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