Cotton demand to remain stable
Demand for cotton will remain stable in the country as Indian and Chinese investors are relocating their textile companies to Bangladesh, the Economist Intelligence Unit (EIU) said.
Low costs will offer incentives for companies to relocate to Bangladesh, it said.
Cotton consumption in Bangladesh moves largely in tandem with activity in the textile sector, which is currently booming, the EIU said.
“After growing by an estimated 14.3 percent in 2012-13, we expect the consumption growth to slow in the next two seasons, but risks are weighted on the upside.”
The EIU is the research and analysis division of the Economist Group that owns the Economist newspaper.
Garment exports from Bangladesh rose by nearly 14.88 percent to $22.18 billion between July and May, performing well in non-traditional export destinations: Russia, Chile, South Korea and Japan.
Domestic supply remains insufficient to meet demand, and Bangladesh currently imports around 4 million bales of cotton annually from the US, India, Pakistan, Australia, Uzbekistan and other countries.
Negotiations with Uzbekistan to develop warehousing facilities for Uzbek cotton are proving difficult, with stakeholders questioning the benefits of such an arrangement for Bangladeshi mills.
“One risk to our forecast is that poor safety standards and reports of accidents in the textile sector could lead to a boycott by importing countries, particularly the EU and the US,” the report said.
“Consumption growth could also be held back by energy shortages to industrial units.”
On the international cotton market, the EIU report said following estimated growth of 2.4 percent in 2012-13, global cotton consumption growth will slow to below 1 percent in 2013-14, before picking up again in 2014-15.
The end of China's stockpiling policy is set to have significant repercussions on global markets, with demand from Chinese mills expected to grow from 2015-16 as reserves are released and global prices move downwards to reflect this surge of available supply, the EIU said.
The relatively strong growth in 2012-13 was partly a reflection of a low base of comparison after two years of falling global consumption, but it was also a response to the sharp fall in prices in 2011-12, according to the report.
The fall in prices improved cotton's competitiveness with synthetic fibres and more than compensated for weak textile and other end-use demand last season, the EIU said.