Cotton Prices surge 91 % and Rayon Use increases

An article in the Wall Street Journal (6 Jan 2011) describes the quandary faced by apparel manufacturers who face cotton price increases of 91 % over the course of the year.  An alternative is another fabric also obtained naturally, from wood pulp, rayon.  Analysts suggest that blends of cotton and rayon have already started appearing, to maintain price points.  Industry experts claim that apparel manufacturers have started quoting prices linked to spot prices of cotton.  Many manufacturers have also started considering moving production to countries with lower manufacturing costs than China- such as Bangladesh, Vietnam and Cambodia, where labor costs are projected to be 22 to 25 % than in China.  Will cotton price changes cause global supply chain adjustments to a level that will change sourcing significantly ? Will these price levels cause more cotton production and thus stabilize the system ?

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About aviyer2010

Professor
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