SPINNERS: CHINA CUTOFF OLD NEWS

Byline:

HONG KONG — Despite a Chinese government ruling in August cutting off cotton supplies to foreign-owned mills in China, several Hong Kong spinners, some with operations in China, claim they have not been sourcing raw cotton from China for several years.
They dispute the contention of the Chinese government that supplying these mills was a major factor in the surge in cotton prices — along with the poor weather and disease that have cut sharply into the harvest.
“This policy is not new,” said Clement Chen, chairman of the Hong Kong Cotton Spinners Association. “Most joint-venture spinning mills haven’t been able to get Chinese cotton for at least the last year or two.” He said speculators were largely responsible for soaring prices, which have topped $1.10 per pound on the futures market.
As reported, Western cotton watchers did not learn of the August action by China until recently.
Chen added that although most Hong Kong mills had anticipated shortages and built up stocks, “most Asian spinning mills haven’t covered their third-quarter needs. There will certainly be a slowdown in activity, perhaps some outright closures.”
Worldwide shortages are affecting mills here as well as those with operations in China.
Nan Fung Textiles, the territory’s largest spinning operation with five mills here, plans to close one mill later this month. The company cites rising costs in imported cotton, about 50 percent of which is purchased from the U.S. The company said it can no longer pass those prices on to weavers.
“But we haven’t bought raw cotton from China since 1988 due to both quality and quantity problems,” said spokesman Alan Chan. He added that Nan Fung had no plans to make up lost production capacity with new facilities in China. “There’s absolutely no advantage of setting up there when supples are insecure,” Chan said.
“We never bought Chinese cotton,” said a spokesman for Central Textiles, which has spinning operations here and in southern Guangdong province. The yarn spun in China is 100 percent re-exported to Hong Kong.
“Nobody went into China thinking that they would have cheap, subsidized cotton,” he said. “If we ever got any, it would be at normal, international prices.” He said minority-owned foreign joint ventures might have received preferential treatment earlier.
Esquel Enterprises, an operation based here that manufactures upscale woven goods and knitwear, said so far the supplies for its joint-venture yarn-dye and weaving mill in southern China had not been affected.
A company spokesperson said Esquel still planned to open a small spinning mill in China. — Fairchild News Service

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