Cotton Price: Nike and H&M at the Center of Ongoing US-China Row

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed in the… read more.
on Mar 30, 2021
  • Cotton price has been on a downtrend throughout March, trading close to where it was in January at 80.32.
  • US, UK, and EU have imposed sanctions on China over human rights violations in Xinjiang.
  • Chinese boycotts on H&M and Nike have resulted in the drop in shares by 2.75% and 0.83% respectively.

Cotton price remain on a downtrend after hitting a 7-year high in late February. Investors expected the agricultural produce to be one of the commodities that will benefit from the super-cycle predicted to define 2021 and beyond. Between January and late February, the price had surged by about 18%. However, it has been on a downward momentum for a month. On Tuesday’s session, cotton price was close to where it began at the beginning of the year at 80.38.

cotton price

East-West Row

The ongoing cotton-related row between China and western countries began in December 2020 when Trump’s government banned Chinese cotton-related imports. This was the approach taken by the US to condemn the alleged human rights violations in China’s region of Xinjiang.

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Xinjiang accounts for 85% of China’s cotton output. In turn, the Middle Kingdom exports about 40% of the textiles consumed globally.

The European Union and United Kingdom have also joined the US in imposing sanctions on China over the human rights issue, through asset freezes and travel bans on some senior Chinese officials. Besides, major textile companies such as H&M and Nike have presented their concerns on the same.

The row has since intensified as Chinese continue to call for boycotts on Nike and H&M. Hashtags such as “They don’t deserve our Xinjiang cotton!” and “H&M clothes are rags” have gone viral. Besides, several e-commerce platforms have dropped H&M as several celebrities cut ties with the firms. As a result, Nike’s shares were down by 0.83% at $132.72 while H&M fell by 2.75% to $199.8.

For those looking to invest in commodities, the east-west row is yet another hurdle to the recovery of cotton price. The textile industry is one of the worst-hit sectors by the COVID-19 pandemic.   

Cotton Price Technical Outlook

On a one-hour chart, cotton price is trading below the 20 and 50-day exponential moving averages. At its current price of $80.32, it is finding support along the psychological level of 80. Having traded sideways for several sessions, the outlook is rather neutral. On the upper side, the prices are likely to find resistance at $81 before moving higher to its next target of $82.81. On the flip side, the levels to watch out for are $79 and $77.16.

cotton price
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