Analysts predict a brighter future for the industry due to the stabilization of the cotton prices in the international market.

ICE cotton prices in 2022 saw strong fluctuations. At some moments, the prices jumped to a record high of 157.00 cents/pound, a peak since 2011, but then tumbled to 70.00 cents/pound, the deepest level since November 2020, when the US dollar price stood at a 20-year peak, following the US FED’s moves of raising interest rates.

Also during that time, China, the biggest cotton importing country, was following a zero Covid policy, which lowered global cotton demand dramatically and forced prices to fall.

As the pandemic and inflation are now better controlled, China has reopened for trade exchange, while the US FED’s interest rate increase decreased from 75 basic points in 2022 to 25 basic points in the latest adjustment last week. This helped boost demand for cotton and stabilize cotton prices.

The cotton price has been hovering around 76.00-90.00 cents/pound.

The demand for cotton from major importers, including China and Vietnam, is predicted to continue to recover in the next months of 2023. In Vietnam, experts said the stable international situation, plus less worry about global economic recession, will help orders return in Q2.

According to Pham Quang Anh, director of Mercantile Exchange of Vietnam (MEV), in the time to come, cotton supply and demand in the globe will be in balance, thus creating favorable conditions for cotton prices at ICE and the market to become stable.

The textile and garment industry brings high export turnover to Vietnam ($44 billion in 2022). It is the fifth ranked industry in the country. In 2015-2020, the industry grew by 17 percent per annum. Analysts believe that the growth potential remains high. 

However, the biggest problem is the heavy reliance on cotton imports and reliance on only one market. Vietnam learned a lesson when in 2022, supply from the US dropped sharply. 

Therefore, in late 2022, the government released Decision 1643 that approved a strategy on developing the textile and garment and footwear industry by 2030, with s vision until 2035, which says the localization ratio of the industry will be 51-55 percent in 2021-2025 and 56-60 percent in 2026-2030.

Hanh Nguyen