Rising medical supply costs? Blame cotton
by Brendon Nafziger
, DOTmed News Associate Editor | January 13, 2011
Cotton prices that haven't been seen since the Civil War, oil approaching $100 a barrel and other factors could help drive up the cost of medical supplies this year, according to a group purchasing organization's predictions.
Analysts with Novation, a GPO in Irving, Texas, said a "tsunami" of problems have struck textiles.
Devastating storms that have racked cotton fields in Pakistan and Australia, coupled with China's insatiable demand for commodities and a severe shortage of spinners, have driven cotton prices to historic levels, "the likes of which we have not seen since Reconstruction," Shawn Fleming, a portfolio executive for Novation, told DOTmed News.
"Typically, over the last 20 years, [the price went] from 50 cents to 70 cents a pound," Fleming said. "We now have pricing over $1.50 a pound."
In August, cotton was trading at around 84 cents per pound. By Dec. 21, it reached a historic high of $1.60 a pound. Some analysts think it will reach $2 by spring.
This translates into higher prices for cotton-heavy supplies, like terry towels. Already, Fleming said he has seen price increases from suppliers of 19 percent in January, on top of a 10 percent increase in July.
But Fleming said Novation hasn't passed this onto its members yet. The GPO launched a "very aggressive" contract haggle with a supplier last year (contracts are typically fixed for three years), but Fleming said it's likely at some point this year prices to members would rise.
"I would expect by midyear, unfortunately, to pass along some increase as yet to be determined to the membership at large, just because I don't see [prices] returning to normalcy, to 90 cents a pound," he said.
Partly, the pressure on pricing comes from bad weather, with this week bringing more bad news. The Australian state of Queensland, particularly the city Brisbane, was struck by massive floods, some of the worst in a century, according to reports. Cotton crop losses total about 300,000 bales, the Australian Cotton Shippers Association said.
But there's also a lack of yarn spinners. "Most manufacturers that manufacture textiles, even if they're vertically integrated all the way through, they typically source their yarn products," Fleming said.
Many of these spinners were put out of business in 2008 when the financial crisis hit, and haven't had time to get back up and running yet, Fleming said. And the ones who are left are charging 30 percent to 35 percent more than they used to.
"There's a huge shortage of yarn spinners -- they can literally pick and choose what they want to spin."
You Must Be Logged In To Post A Comment
Registration is Free and Easy.
Enjoy the benefits of The World's Leading New & Used Medical Equipment Marketplace.