Required Report - public distribution

**Date:** 4/14/2004

**GAIN Report Number:** GM4017

GM4017

**Germany**

**Cotton and Products**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Karina Ramos

U.S. Embassy, Berlin

**Prepared by:**

Sabine M. Lieberz

**Report Highlights:**

The German textile industry continues to face strong competition from
low cost countries. There have already been a number of closure or
relocation of production facilities from Germany to other countries.
This also affects cotton spins and weaving companies. As a consequence,
German imports of raw cotton dropped by 16 percent to 105,669 MT in
MY 2002/03. The top five suppliers were Sudan, Uzbekistan, Chad,
Cameroon, and Mali. The Unites States ranked number seven with 6,004 MT
and a market share of 5.7 percent.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Berlin \[GM1\]

\[GM\]

**Production**

For climatic reasons there is no domestic raw cotton production in
Germany. The country therefore depends on the import of cotton and
cotton products for its textile and apparel industry.

# Consumption

Calculated consumption (=beginning stocks + imports -- exports -- ending
stocks) of raw cotton amounted to 100,639 MT[^1] in MY[^2] 2002/03
versus 114,306 MT in MY 2001/02, a decline of 12 percent. Figures for
the first 6 month (August through January) of MY 2003/04 show a further
drastic reduction in calculated consumption. The German industry hopes
for a better situation in the remaining months. Nevertheless calculated
consumption for the full marketing year MY 2003/04 is expected to add up
to only about 80,000 MT, well below the MY 2002/03 level.

Tough competition from low cost countries continues to force the German
textile and apparel industry to move production facilities from Germany
to countries in Eastern Europe and Asia. Cotton spinning and weaving
companies have followed this trend with a certain time lag. According to
the German Industry Association for Yarns, Fabric and Technical Textiles
(IVGT) the number of ring spindles in Germany dropped from 600,000 in
1999 to 495,000 in 2003. Over the same period rotor spindles were
reduced from 65,000 to 58,000.

Roughly 35 percent of the yarns used by the German textile industry are
made from cotton, 5 percent from wool and 60 percent from man-made
fiber. These percentages may vary slightly from year to year, depending
on the latest fashion trends.

# Trade

In Germany, cotton imports mainly follow the consumption trend. In MY
2002/03 German imports of raw cotton totaled 105,669 MT. This is a
decrease of about 20,000 MT or 16 percent compared to the previous
season.

On a dollar basis, the average import price increased by 11 percent from
\$ 1,044 per MT in MY 2001/02 to \$ 1,158 per MT in MY 2002/03 in line
with the world market price. However, converted into Euros, average
import prices in MY 2002/03 were 1,091 Euro per MT and thus 5.6 percent
below MY 2001/02. Over the first six month of MY 2003/04 average import
prices have risen both in U.S. dollars as well as in Euro, albeit to a
different extent. In U.S. \$ import prices increased by 18 percent to \$
1,393 per MT, while the increase in Euro was only 8 percent to 1,180
Euro per MT.

The top five suppliers of raw cotton to the German market were Sudan,
Uzbekistan, Chad, Cameroon, and Mali, with a market share of 15, 12, 12,
8, and 7 percent, respectively. The United States ranked number seven
with 6,004 MT and a market share of 5.7 percent in MY 2002/03. This
compares to 6,893 MT and a market share of 5.5 percent in MY 2001/02.
The average import price for U.S. cotton was above average amounting to
U.S.\$ 1840 in MY 2002/03 versus U.S. \$ 1345 in MY 2001/02. The high
price of U.S. cotton compared to similar quality from other sources
posed a big obstacle to increasing U.S. cotton exports to Germany. The
currently weaker U.S. dollar could lead to an increase in opportunities
for U.S. cotton in the German market.

German trade statistics do not distinguish between Pima/ELS[^3] and
Upland cotton. The International Cotton Advisory Committee (ICAC) in
Washington, D.C. estimates German Pima/ELS cotton imports in MY 2002/03
at 22,400 MT. That is about 21 percent of total German imports. For U.S.
cotton exports to Germany as shown by the FAS/USDA export sales
statistics, the relation is almost reverse: Pima/ELS cotton makes up 70
percent of total U.S. cotton shipments to Germany, upland cotton 30
percent.

# Table 1: U.S. Exports of Pima/ELS and Upland Cotton to Germany, in running bales

  ----------- ----------- ----------- ----------- ----------- -----------
  Running     1998/99     1999/00     2000/01     2001/02     2002/03
  bales                                                       

  Pima/ELS    13,500      18,600      22,200      17,900      31,600

  Upland      5,500       6,200       1,200       14,600      12,800
  Cotton                                                      

  Total       19,000      24,800      23,400      32,500      44,400
  ----------- ----------- ----------- ----------- ----------- -----------

Source: USDA/FAS Export Sales
(www.fas.usda.gov/export-sales/myrkjuly.htm)

German exports of raw cotton amounted to 13,714 MT in MY 2002/03, about
3,000 MT less than in MY 2001/02. For MY 2002/03 exports are forecast at
a level of 12,000 MT. As Germany is not producing cotton, all exports
consist of re-exports. In MY 2002/03, 29 percent of the exports were
destined to the Czech Republic, and 24 percent to Austria.

# Stocks

High cotton prices resulted in low ending stocks of 12,000 MT in MY
2002/03. For MY 2003/04 ending stocks are expected at a level of 10,000
MT.

# Textiles/apparel

The value of total turnover of the German textile industry (includes
yarn and fabric, excludes apparel) amounted to 13.5 billion Euro (U.S.
\$ 11.9 billion[^4]) in CY 2003, a drop of 6 percent compared to CY[^5]
2002. The turnover of apparels amounted to 9.2 billion Euro (U.S. \$ 8.1
billion), a drop of 8.7 percent. 38 percent of textile turnover and 32
percent of apparel turnover were generated through exports.

40 percent of the domestically produced textiles consist of technical
textiles, such as tents, sails, filters, nets, bulk bags, shades; 30
percent are further processed into apparel and the remaining 30 percent
consist of home textiles, such as towels, curtains, linen, table cloths,
carpets and the like.

The sluggish domestic demand is mainly a consequence of the slow German
economy, and the ongoing public discussion of reductions in the welfare
system. Cuts in the public health system as well as in the pension
scheme resulted in reduced consumer spending. This means that people
make fewer purchases but also that they are extremely price sensitive
when they make their buying decision. A recovery for 2004 is not
expected by the German textile industry.

# Policy

On December 31, 2004 the Agreement on Textiles and Clothing (ATC) will
expire, and with it the quota system for international trade in textiles
and clothing, which restricted for instance Chinese exports to Germany.
While the U.S. cotton industry is pressing for a continuation of the
quotas for China until the end of 2007, the German cotton and textile
industry does not see much benefit in this. They feel that the quotas
did not give them much protection in recent years. Also, when China
joined the WTO last year, it committed itself to the reduction of import
tariffs. The German textile industry views this as a chance for exports
of high value textiles to China as well as for increased joint ventures
in China.

# Important trade events

The most important trade show in Germany for textiles is the annual
"Heimtextil" show in Frankfurt. Cotton Council International, Cotton
Incorporated, and Supima Association of America are represented with an
information booth at Heimtextil. The next show will be held January 12
through 15, 2005. For details please consult:

<http://heimtextil.messefrankfurt.com/frankfurt/en/home.html>

**Table 2: Raw Cotton PSD (in MT)**

![](media/image2.wmf)Source: FAS/Berlin based on data from the German
Federal Office of Statistics, Wiesbaden, and Bremer Baumwollbörse

![](media/image3.wmf)**Table 3: German Import Prices for Raw Cotton (in
US \$ per MT)**

Source: FAS/Berlin based on data from the German Federal Office of
Statistics, Wiesbaden

**Table 4: German Imports and Exports of Raw Cotton (in MT)**

![](media/image4.wmf)

![](media/image5.wmf)Please note:

MY 2001 = August 2001 through July 2002

MY 2002 = August 2002 through July 2003

MY 2003 = August 2003 through January 2004 (6 month)

**Table 5: German Imports and Exports of Cotton Yarns\
(HS-Codes 5204, 5205, 5207 in MT)**

![](media/image6.wmf)

![](media/image7.wmf)

**Table 6: German Imports and Exports of Cotton Fabric (HS-Codes
5208,5209 in MT)**

![](media/image8.wmf)

![](media/image9.wmf)

[^1]: MT = metric ton

[^2]: MY = marketing year. The marketing year for cotton runs from
    August through July.

[^3]: ELS = extra long staples

[^4]: Conversion rate (average for CY 2003): U.S.\$ 1 = Euro 0.8840

[^5]: CY = calendar year