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China Economy’s Harsh Winter to Hurt Cotton, Commodities

Bloomberg - Aug 22, 2012

Cotton consumption in China, the world’s largest user, may shrink 11 percent this year as a deteriorating economy hurts demand and causes a buildup in commodities, according to Weiqiao Textile Co. (2698) Futures fell.

“The Chinese economy is only at the beginning of a harsh winter,” Zhang Hongxia, chairman of China’s largest cotton- textile maker, said in an interview in Hong Kong on Aug. 20. “China now is facing a situation where everything from coal to steel inventories are piling up.”

Zhang’s outlook runs counter to forecasts from banks such as Goldman Sachs Group Inc. that forecast a second-half rebound as the government expands stimulus. China’s economy grew at the slowest pace in three years in the second quarter as Europe’s debt crisis hurt exports and a government drive to cool consumer and property prices damped domestic demand. Cotton for December delivery declined as much as 1.6 percent on ICE Futures U.S.

“The slowdown in China is due to overall industrial overcapacity accumulated in recent years,” said Lou Zhi, head of the trading department at Hunter Capital Ltd., a Dalian-based commodity hedge fund. “Overseas demand is unlikely to revive soon as the European debt crisis looks set to drag on. Despite a recovery in the U.S., growth there seems anemic.”

Read Full Article from Bloomberg

- Posted: 2012-08-22 15:32:55


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