Thailand. Cotton and Products Annual. Apr 2015 Апрель 19, 2015
TH5041: Thailand's MY2015/16 cotton imports are forecast to increase slightly from level's in MY2014/15. Slower sales of cotton yarn and fabric in MY2014/15 will likely leave spinners with large inventories of cotton-fiber yarn. As a result, spinners are expected to continue operating at only 65 percent of capacity.
MY2015/16 cotton imports are forecast to increase only around 1 percent after a downturn in MY2014/15. Spinners are expected to continue operating at only 65 percent of capacity in anticipation of large inventories of cotton-fiber yarn carried over from MY2014/15. Imports of U.S. cotton are likely to increase to around 365,000 bales as large spinners diversify their production to superior medium and fine-count yarn. MY2014/15 cotton imports are expected to be down 100,000 bales from MY2013/14 due to Thailand's vulnerable economic recovery and the shutdown of spinning facilities. The economic expansion in 2015 is slow due to lower-than-expected growth of government and private expenditure and exports. Spinners are operating at around 63 percent of full capacity due to slower domestic and export sales of cotton yarn and fabric in the first half of MY2014/15. Some spinners, which account for approximately 10 percent of total cotton-fiber yarn production, closed their spinning facilities. Imports of U.S. cotton are expected to decline significantly to around 350,000 bales compared to 530,639 bales in MY2013/14 as spinners limit their purchase to cheap cotton from other origins to curtail their losses.
Situation and Outlook for Upland and Value-Added cotton
Cotton production in Thailand is marginal at 1,500 to 1,600 metric tons (2,300 – 2,500 bales). This production accounts for less than one percent of total demand. Thai farmers prefer cultivating cassava and sugarcane due to relatively higher returns they received vis-a-vis cotton. The government still bans the use of transgenic varieties. Also, there is no domestic support program specifically for cotton farmers.
MY2015/16 cotton consumption is likely to increase 3 percent from MY2014/15 in anticipation of moderate economic recovery. According to the most recent economic forecast by the Bank of Thailand, the Thai economy is expected to grow only 3.9 percent in 2016 which is below an average annual economic growth of 4.6 percent in the past decade. Sources expect the spinning industry to slowly recover from the downturn over the past three years when spinners were adversely affected by high production costs which resulted from inventories of cotton purchased at record high prices in 2011 and contract default problems. Average capacity utilization is forecast to increase only marginally to 65 percent of in MY2015/16, up slightly from an average of 60 percent during MY2011/12 – MY2014/15. The increase is still far below normal rate of 70-80 percent. This is mainly the result of large inventories of cotton yarn carried over from MY2014/15. Meanwhile large spinners, who have replaced old machines with automated machines, will produce more superior medium and fine-count yarn which is still competitive in export market.
MY2014/15 cotton consumption is likely to decline to around 1.5 million bales, down 4 percent from 2013/14, due to vulnerable economic recovery. The government revised down the GDP growth to 0.7 percent for 2014. Also, signs of economic recovery in the first half of 2015 remain uncertain despite the government forecast of 3.5 to 4.5 percent growth.
In the first half of MY2014/15, production of cotton and cotton-blended yarn declined 3 to 4 percent based on Manufacturing Production Index reported by the Office of Industrial Economics. Spinning mills are operating at around 63 percent of capacity, compared to the normal rate of 70-80 percent due to slower domestic and export sales of cotton yarn and fabric. Domestic sales of cotton yarn declined around 3.5 percent from previous year. Exports of cotton yarn and fabric declined approximately 20 - 30 percent in the first five month of MY2014/15. Some spinners, particularly medium-scale coarse-count yarn manufacturers, reportedly operated at losses due to competition from relatively cheaper imported cotton yarn from China. While synthetic-fiber yarn production declined 5-10 percent from the same period last year, its market share is expected to continue to increase due to its relatively cheaper prices compared to cotton-fiber yarn. In 2013, the market share of cotton-fiber yarn declined to 40 percent of total yarn consumption, compared to 42 percent in 2012.
In the second half of MY2014/15 cotton consumption will likely decline further due to the shutdown of uncompetitive spinning and garment manufacturers. Spinners who left the industry reportedly account for around 10 percent of total yarn production. Although some spinning and weaving facilities were taken over, the sector is reportedly operating at only around 30 percent of full production capacity, producing mostly coarse-count cotton yarn. Meanwhile, garment manufacturers who have relocated to neighboring countries since 2012, as a result of the increase in Thai minimum wages, are currently producing at full capacity due to comparative advantage on labor cost and the duty-free trade privileges under the Generalized System of Preferences (GSP) with European countries. However, the linkage to Thai spinning and weaving industries is reportedly limited as industries in neighboring countries import relatively cheaper fabric from China and Korea. Meanwhile, Thai garment's export competitiveness in European market will be negatively impacted by expiration of GSP on January 1, 2015 resulting in a higher tariff on garment product (12% compared to 2.4% under GSP).
MY2015/16 cotton imports are forecast to increase only 1 to 2 percent from MY2014/15. Spinners are expected to continue limiting their purchases for immediate use in anticipation of large inventories of cotton yarn. Imports of U.S. cotton are expected to increase to 365,000 bales, up around 4 percent from MY2014/15 as large spinners will increasingly rely on high quality fiber for their medium and fine-count yarn production.
MY2014/15 cotton imports are likely to decline to around 1.4 million bales, down 6 to 7 percent from MY2013/14 due to economic slowdown and the shutdown of spinning facilities. In the first five months of MY2014/15, cotton imports fell 10 percent from the same period last year. Imports of U.S. cotton declined by 43 percent as spinners limited their purchase to cheap cotton, particularly from Brazil, for immediate use. Also, spinners who terminated their operation mainly use U.S. cotton for their yarn production. However, imported cotton from origins other than U.S. and Australian cotton is not suitable for export-oriented textile products. The increase in low quality cotton imports resulted in a reduction of cotton yarn and fabric exports by approximately 20-30 percent in the first five month of MY2014/15.
Imports of cotton yarn also declined around 9 percent in the first five months of MY2014/15 in line with a reduction in production of cotton fabric and textile products. Import of cotton fabric also declined around 9 percent from the same period last year.
MY2015/16 cotton stocks are forecast to continue declining to the minimum level of around 1 to 2 months of uses. Spinners will likely continue to limit their purchase for immediate use.
MY2014/15 cotton stocks are likely to decline 16 percent from MY2013/14. Spinners are cautious of building up stocks as world prices of cotton are still under downward pressure. In addition, sales of cotton yarn are lower than expected in the first half of MY2014/15 due to a reduction in domestic and exports of cotton yarn and fabric. Consequently, spinners still hold large inventories of cotton yarn, which are up around 5 percent from the same period last year. Also, spinners still have liquidity problem, particularly those who are on the default list.