Imports by China are expected to increase by 25 percent to 3.5 million tonnes, assuming a rebound in mill use and a rebuilding of stocks from historically low levels.
Brazil and Australia are expecting to import more lint around 5-7 percent due to their domestic use and flat crop size this season. The 2011-12 US cotton supply and demand estimates include lower production, domestic mill use and ending stocks compared with December 2011.
Importantly the World Bank has rightly warned the developing countries that the economic and financial deterioration in the larger economies is bound to adversely effect the less developed world.
Now it is also being reported that Chinese growth has come down to its lowest over the past couple of years.
Even the EFSF, the Eurozone bailout fund has been downgraded by Standard and Poors rating agency.
Moreover, in a global village, it should not surprise us to know that China's imports and exports are going down due to the decrease in the performance of the Eurozone economies with which China has a sizeable business relationship.
It may thus be surmised that the incoming years viz, 2013, 2014, 2015 or even beyond will be globally consumed by a weak and treacherous socio-political outlook.
It is pertinent to mention that analysts believed that with cotton output expected to surpass global consumption after 7-years along with upcoming PTA production capacities in next three years is likely to restrict PTA margins on the lower side.
Analyst have predicted that with better fiber prices available to farmers along with higher global crop yields, cotton production is expected to surpass consumption after 7 years. Howver, the cotton production is expected to increase by 9 percent to 124.7mn US bales compared to 114.4mn bales seen in FY11-12. With these better output numbers, the lint prices have started to ease from its peak level of $2.14/lb to $1.39/lb thus affecting the demand and prices for its substitute, polyester – a product manufactured from PTA.
Thus, after witnessing a peak of $1,525 per ton in the same period of cotton shortages the international PTA prices have now corrected to $1,185 per ton, a 22% decline in last 3 months.
Analysts believe with higher cotton availability and lower PTA prices compared to last year, demand for PTA would remain under pressure restricting the upside in the primary margins.