Cotton firms spinning

November 21, 2011 | 11:00

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A lack of capital is hurting domestic cotton firms.

illustration photo

According to the Vietnam Cotton Association, in 2011’s first quarter due to a scarcity of resources, cotton prices increased continuously and reached a record $5 per kilogramme, before sharply declining to an unprecedented low of $2.4-2.5 per kilogramme in the second quarter.

Damsan Textile Joint Stock Company general director Vu Huy Dong said volatile cotton prices were a big problem with some firms having to break contracts leading to the threat of bankruptcy.

At present, the domestic cotton supply only meets 2 per cent of the domestic demand. In 2010, Vietnam spent $623 million to import 360,000 tonnes of cotton. Although imports in the first 10 months of this year decreased by nearly 14 per cent.

A Cotton Incorporated Group economist Jonathan Devine said: “In the context of world cotton prices falling sharply, to avoid the impact from the decline in cotton crop areas during 2012-2013 and the instability of European economies, Vietnam’s enterprises should consider buying cotton stocks in the upcoming year.”

However, local firms are prevented from stockpiling cotton due to high commercial bank lending interest rates.

According to the Ministry of Planning and Investment, lending interest rates which the State Bank is trying to reduce to 17-19 per cent annum, fluctuated from 18-21 per cent this year.

vir.com.vn

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