Falling cotton prices could lift the pressure on clothes prices and the Swedish apparel sector


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Monday, 22 August 2011
The financial turmoil has now beginning to infect the commodities market whereby recently the price of cotton has been observed plummeting. From its peak in March this year, the price has been halved in recent review. But this does not necessarily mean that that will be translated to lower clothing prices.

When the Swedish clothing manufacturer Kappahl presented his spring collection in March this year, cotton prices was at their highest level ever - 4400 U.S. dollars for one ton of cotton.
Today, barely six months later, the cotton prices have halved, blamed on reduced demand from China, the world's largest cotton importer.

The backlog in the commodity markets means that it may take a few months before the price drop in the raw material itself is felt therefore impacting price on store floors.

According to Bjarne Schieldrop, commodities analyst at SEB bank, talking radio Sweden, said that “clothing prices should be falling a little in the first quarter of next year because we now have lower prices for cotton at the moment.”

Expensive clothes this fall will therefore be translated to cheaper summer clothes next year, if one believes in the commodity analyst.
But KappAhl's information managers, Charlotte H�gberg, to radio Sweden that it might not necessarily be reflected in the prices as proposed by analysts.

“It's a bit early to say what prices will be played in stores the coming periods. Raw material is one of the sources of prices that apply to the prices of clothing. Other things such as production capacity and how the market looks overall will also play.”

Transportation, wages, rents and interest rates does of course also play a central role in the prices of clothes in the stores. But given the economic developments in recent weeks, it's not too wild a guess to think that the conditions to lower prices of clothing are not already there.
By Team

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