cotton price and market fabric mill’s perspective november 2010 by dr gordon yen executive...
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![Page 1: Cotton Price and Market Fabric Mill’s Perspective November 2010 by Dr Gordon Yen Executive Director Fountain Set (Holdings) Ltd](https://reader035.vdocument.in/reader035/viewer/2022062713/56649cf55503460f949c47fd/html5/thumbnails/1.jpg)
Cotton Price and Market
Fabric Mill’s PerspectiveNovember 2010
by Dr Gordon YenExecutive DirectorFountain Set (Holdings) Ltd.
![Page 2: Cotton Price and Market Fabric Mill’s Perspective November 2010 by Dr Gordon Yen Executive Director Fountain Set (Holdings) Ltd](https://reader035.vdocument.in/reader035/viewer/2022062713/56649cf55503460f949c47fd/html5/thumbnails/2.jpg)
Price Trend 2010
Source: TFC Commodity Charts
![Page 3: Cotton Price and Market Fabric Mill’s Perspective November 2010 by Dr Gordon Yen Executive Director Fountain Set (Holdings) Ltd](https://reader035.vdocument.in/reader035/viewer/2022062713/56649cf55503460f949c47fd/html5/thumbnails/3.jpg)
Inventory Exposure of Supply Chain
GarmentFOB = $1M
/mth
Inventory Turnover Days 6 months 4 months 2 months
Cost % of Raw Material over sales
70% 60% 55%
Inventory Value (US$) $1,386k $1,320k $1,100k
$ 330k x 70% (Cost % of Raw Material over
sales) x 6 months
$ 550k x 60% (Cost % of Raw Material over
sales) x 4 months
$ 1M x 55% (Cost % of Raw Material over sales) x 2 months
Cotton$231k/mth
Yarns$330k/mth
Fabrics$550k/mth
![Page 4: Cotton Price and Market Fabric Mill’s Perspective November 2010 by Dr Gordon Yen Executive Director Fountain Set (Holdings) Ltd](https://reader035.vdocument.in/reader035/viewer/2022062713/56649cf55503460f949c47fd/html5/thumbnails/4.jpg)
Impact of Price Increase on Material Cost
FabricFabric55%55%
YarnsYarns60%60%
CottonCotton70%70%
+ 35.4%
+ 115%
+ 8.1%
+ 28.1%
Assuming no inflation in processing cost
NYBOT Cotton NYBOT Cotton Raw Material Input Value(US$'000)
Garment FOB
(Avg. US$/lb)(Avg. US$/lb) Price Factor Cotton Yarn Fabric
Nov 2008 0.48 1 231 330 550 1,000
Nov 2009 0.65 1.35 313 412 632 1,082
Nov 2010 1.3 2.71 626 725 945 1,395
![Page 5: Cotton Price and Market Fabric Mill’s Perspective November 2010 by Dr Gordon Yen Executive Director Fountain Set (Holdings) Ltd](https://reader035.vdocument.in/reader035/viewer/2022062713/56649cf55503460f949c47fd/html5/thumbnails/5.jpg)
Who Made Money??
…didn’t fabric mills and spinners make BIG margins?
Some say…
![Page 6: Cotton Price and Market Fabric Mill’s Perspective November 2010 by Dr Gordon Yen Executive Director Fountain Set (Holdings) Ltd](https://reader035.vdocument.in/reader035/viewer/2022062713/56649cf55503460f949c47fd/html5/thumbnails/6.jpg)
Theoretical Price Increase of Fabric
FabricFabric55%55%
YarnsYarns60%60%
CottonCotton70%70%
NYBOT Cotton NYBOT Cotton Raw Material Input Value(US$'000)
Garment FOB
(Avg. US$/lb)(Avg. US$/lb) Price Factor Cotton Yarn Fabric
Nov 2008 0.48 1 231 330 550 1,000
Nov 2009 0.65 1.35 313 412 632 1,082
Nov 2010 1.3 2.71 626 725 945 1,395
+ 14.7%
+ 49.8%
US$2.5/lb
US$4.3/lb
71.8%
Assuming no inflation in processing cost
![Page 7: Cotton Price and Market Fabric Mill’s Perspective November 2010 by Dr Gordon Yen Executive Director Fountain Set (Holdings) Ltd](https://reader035.vdocument.in/reader035/viewer/2022062713/56649cf55503460f949c47fd/html5/thumbnails/7.jpg)
…people who had a big pile of EXTRA cotton…
So Who Made Money??
![Page 8: Cotton Price and Market Fabric Mill’s Perspective November 2010 by Dr Gordon Yen Executive Director Fountain Set (Holdings) Ltd](https://reader035.vdocument.in/reader035/viewer/2022062713/56649cf55503460f949c47fd/html5/thumbnails/8.jpg)
Supply Chain Inventory Value for US$1M in FOB Garment Based on 2008 Price (US$’000)
Nov 2008 1,386 1,320 1,100
Nov 2009 1,877 1,647 1,264
Nov 2010 3,754 2,898 1,889
Impact of Price Increase on Inventory
2 months4 months6 months
Depending on season
FabricFabric55%55%
YarnsYarns60%60%
CottonCotton70%70%
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Other Factors Increasing Costs and Working Capital
• Shortening of payment period: From Open Account to CBD, Down Payments
• Other costs inflations: wages, chemicals, energy, etc
• Tightening of Credit Terms Throughout Supply Chain: Full or Partial CBD, Down Payments
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Price Trend 2010
Source: TFC Commodity Charts
![Page 11: Cotton Price and Market Fabric Mill’s Perspective November 2010 by Dr Gordon Yen Executive Director Fountain Set (Holdings) Ltd](https://reader035.vdocument.in/reader035/viewer/2022062713/56649cf55503460f949c47fd/html5/thumbnails/11.jpg)
Will History Repeat Itself?
Source: TFC Commodity Charts
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