Textile demand to rebound after tariffs delayed
Textile demand is poised to recover as US delays imposition of 10% import duty on Chinese goods. The date is now fixed for imposing the duty is 15 December on products including mobile phones, laptops, video game consoles, some toys, computer monitors, and certain footwear and clothing.. This move has reinstated confidence in players in textile manufacturing and they see a smooth business during Christmas and New Year celebration.
The US now plans to levy tariffs this September on about half of the products that had been originally specified, minus a group of items that would receive exemptions for health, safety and national security reasons. US President, speaking to news agencies, said that the delay was in part to avoid hitting US shoppers this Christmas. The president had on 1 August stated that US would impose a 10% tariff on US$300 billion of Chinese goods, blaming China for not following through on promises to buy more American agricultural products.
Usually the peak textile demand season begins from late August when discussions and negotiations begin for apparels and clothing to be sold during the festive season. Orders start trickling in mid to late September and production begins to pick up rapidly. Shipment and deliveries of goods begin from late November. So this announcement has come at the right and crucial time.
In the textile value chain, polyester feedstock, paraxylene prices jumped US$10 a ton on 14 August in Asian markets while European markets followed through. The polyester chain starts from paraxylene from which purified terephthalic acid is derives and further processed into polyester fibre and filament that is used in apparels and clothing, furnishing material, carpets, etc. Thus the rise in prices will have percolating effect on downstream which have been facing price erosion and slump in textile demand.
Cotton markets also showed upward momentum. The US cotton Futures on ICE rose US cents 27 per pound while Cotlook A index jumped US cents 130 on the day. The US Cotton futures on the ICE had fallen to a 3-year low while the spot benchmark, the Cotlook ‘A’ index is at a multi-year low in the first week of August and their upward momentum was demolished by two key factors – expected larger harvest and the US-China trade war.
The stock markets reacted quickly with a rally on major exchanges. Technology investors welcomed the exemptions, pushing an index of chip stocks up 2.8%. Retailers and industrial shares also rose, with General Electric up 4.4%. On Wall Street, the three main share indexes were up more than 2% at one stage. The Dow Jones and S&P 500 finished 1.4% ahead, while the tech-dominated Nasdaq finished up 1.9% – led by a 4% rise in Apple. In UK, stocks exposed to global trade also rose, with miner Glencore closing up 2.3%.
Source: Global Markets Weekly Review
