Common sense suggests that cotton demand would pick up when prices are down, except in 2023 and potentially 2024 demand for yarns, fabrics, clothing, and home textiles is anaemic. Nothing is selling; production sits in inventory or is side-lined in the shadow of idled equipment.
It's a story that has been covered before — inflation, an uncertain global environment, and inroads made by synthetic fibres (and more) have combined to weaken the market for cotton. In 2022, cotton's share of the global fibre market has fallen to just 23%, according to the International Cotton Advisory Committee (ICAC).
Moreover, ICAC statistics show that cotton's market share has fallen steadily over the years. For example, 20 years ago, cotton's share stood at 40%. But for 2023, in any case, prices hover at about 78-80 cents for weeks on end while textile mills and their customers struggle with excessive inventory and fickle consumer demand thanks to the effects of the pandemic, wars, supply chain disruptions, rising interest rates and, of course, our old friend — inflation.
A poor cotton industry mood ahead of 2024
Cotton prices may be depressed as we approach 2024, but so are industry attitudes. Folks are in a dour mood. At the recent ICAC Plenary meeting in Mumbai, industry leaders, innovators, scientists, and policymakers expressed dismay over the condition of the textile market. "When will the market improve?" was an often-repeated refrain during the meeting.
Interestingly, the only presenters who sounded optimistic about the future were the environmentalists. Whether the market is up or down, from the perspective of environmental advocates, the industry's problems with waste, pollution, and climate destruction continue whether the industry is profitable or not. Indeed, if the industry exists, there will be environmental concerns.
Is the Indian textile industry at a crossroads?
The Indian textile industry is particularly wary of the future. Affected by disappointing textile exports, the Indian industry expressed frustration over its state of affairs and is struggling to find a way to restore business to pre-pandemic levels. This frustration is no more evident when considering the difficulties India’s clothing industry has had in establishing a large and sustainable garment sector and the textile industry's seeming inability to nurture a synthetic fibre industry capable of supporting a synthetic fabric business.
In the case of clothing, India has struggled to establish a business anywhere near the scale of the industry in, say, Bangladesh. India has always been cotton-centric and favored manufacturing cotton fabrics instead of synthetic alternatives. Being the world's largest cotton producer, it's not hard to see why India also excels in manufacturing cotton fabrics.
However, China looms large in any discussion of textiles. China is the largest producer of synthetic fabrics and dominates the global market for such products. Synthetic fabrics compete with cotton fabrics, so it's not surprising to see that the success of China's synthetic fiber industry has come in part with India having to work overtime to maintain its share of the global textile business.
Indeed, India's strength in cotton is also a liability of sorts. With the rise of fast fashion and the advent of quickly made, disposable apparel, often sold at incredibly low prices to consumers, synthetics have the upper hand. Synthetic fibre (such as a polyester staple) is typically cheaper than cotton. As a result, mills and their brand customers have a built-in incentive to use more synthetics. For sure, if consumers don't balk, the wave of synthetics in the market will only build higher. For India, a wave of synthetics leaves many selling products, with cotton struggling to remain relevant in today's market.
More so, if fast fashion and hyper-aggressive discounting continue to gain market share, synthetics will rule the day. For cotton, saddled with higher prices and weakening demand, the outlook remains bleak. There's no way to sugar-coat this: the current situation for cotton is bad, and prospects are gloomy. Even restoring the apparel market to pre-pandemic levels may not meliorate cotton's lustre. Fast fashion is here to stay; hyper-fashion is poised to eclipse that.
Oh gosh, I need a beer. It gets tiresome to write about such gloomy prospects. But must everything be so glum? There must be a way out.
Is a positive turn of events around the corner?
Well, as it turns out, there are signs that the market is stabilising. When looking at the US retail apparel market, the largest in the world, inventories have levelled out. There are signs that the inventory accumulation that has plagued the industry over the last 18 months has partially been worked off. Retail sales, in turn, are flat but relatively stable. Let's see what happens this holiday season. Maybe there will be a present under the Christmas tree for the industry.
Another key measure of the health of the US retail clothing business is the industry's sales-to-inventory ratio, which is trending back to pre-pandemic norms. Equilibrium in the market has been tentatively restored. Should retail apparel sales rebound, demand within the textile supply chain will improve markedly.
A case in point: US textile and apparel imports. After many months of declining from 2022 levels, imports gained for the month of October 2023 over October 2022 when measured in square meter equivalents. This is a welcome turnaround as it is a measure of the strength of demand for textiles and apparel. Of course, one month's result does not make a trend, but it is a cautiously optimistic sign.
Looking ahead to the cotton market in 2024
There are signs of improvement for the cotton sector as we move towards 2024. At least there is some stability returning to the business. Sure, prices remain depressed, but prices may improve as demand improves. There is reason to believe the market will regain its mojo in 2024. My crystal ball suggests by mid-year. Let's see.
For cotton, however, the fibre's prospects remain uncertain. Synthetics are dominant, and there's little to suggest that will change. If consumers refuse to embrace the benefits of cotton because of price or fashion, the prospects for cotton are not great.
Will cotton go the way of wool and become a luxury fibre? I hope not. Too many people pin their livelihoods on cotton. As discussed at ICAC, hundreds of thousands of farmers are growing cotton in India alone. Cotton is an essential crop for so many.
Fast fashion works today, but will it work tomorrow? If slow fashion can carve out a prominent place in the market, then there's added hope for cotton, a preferred fibre for makers of higher-end slow fashion products. It's too early to abandon cotton. After all, today's problems set the stage for tomorrow's solutions.
