Life is getting even harder for China's textile manufacturers as they struggle to cope with a beleaguered world market for their exports.

Now, the price of cotton is on the rise, eroding already thin profit margins among the country's garment makers.

"The cotton price is really getting higher," said an employee surnamed Fang of Hangzhou Jigao Textile Co.

The man, who answered a reporter's phone call but refused to give his name or position, said cotton cloth prices have risen about 1 yuan (US$0.15 cents) per meter, translating to a price hike of roughly 2 yuan (US$0.29) per garment.

Fang said the company exports its products mainly to Japan, and the increased cost of raw materials would erode its profitability by about 20-30 percent.

The price of high grade cotton sold to textile manufacturers has spiked 500 yuan (US$73.21) per ton, or about 3 percent, since early May, while the price of low grade cotton has remained nearly unchanged, said Li Jinqian, a distributor based in Anyang, Central China's Henan Province.

Textile exports gradually decreased month-on-month from January to March, though the aggregated export value in the first quarter grew by 15.2 percent compared with the same period last year, according to data from China's General Administration of Customs.

The average profit margin among textile manufacturers is about 3-5 percent, and even lower for some, according to the China Chamber of Commerce for Import and Export of Textiles.

The weighted average spot price of grade-three cotton or standard grade cotton was 17,323 yuan (US$2,536) per ton Wednesday, about 30 percent higher than in September last year, according to the China Cotton Association.

"The price hike is quite substantial, rivaling only the spike in 2003-2004," said Feng Mengxiao, information director of cncotton.com, a portal for cotton market information.

Snowy and rainy weather in the major production sites of cotton in China led to the declining output, especially for high-grade cotton, Feng said.

Feng added some distributors have stockpiled cotton expecting to sell when the market price goes even higher.

Many textile manufacturers have built 38 day inventories, 16 percent larger than normal, and some even have enough in stock to last till new cotton hits the market in August, she noted.

(Global Times May 27, 2010)