Textile makers in China, which uses more than 40 percent of the world's cotton, face a supply shortage that has sent prices to a record and is endangering their survival, an industry group said.

The textile market has a shortage of raw material, China Federation of Logistics and Purchasing, which publishes the country's official Purchasing Manager's Index, said in a report e-mailed today. Cotton and yarn prices rose sharply, affecting company profit and endangering company survival.

Cotton futures in Zhengzhou surged to a record for a third day today, and futures traded in New York reached the highest price since trading began 140 years ago. Prices have jumped because of lingering concerns that a production deficit in China, the world's biggest buyer, may be bigger than estimated, boosting the nation��s import needs and draining global stockpiles that are already forecast to drop to a 14-year low.

China's production of the fiber in the year that began Aug. 1 was forecast by the U.S. Department of Agriculture to lag behind domestic consumption for a 12th straight year, shrinking the Asian nation's inventories to a 16-year low.

The latest USDA estimate on China's crop was released on Oct. 8, before the China Meteorological Center said on Oct. 25 that a cold front moving across the nation might hamper cotton harvesting and reduce quality, adding to global supply concerns.

China's cotton imports were forecast to rise to 13 million bales this year, from 10.9 million bales a year earlier, as global stockpiles decline, according to the USDA.

Outstanding sales contracts of U.S. upland cotton to China were 2.46 million bales as of Oct. 21, about 26 times more than a year earlier, according to the USDA. The fiber is for delivery in the 12 months ending July 31, 2011.

source:Bloomberg