Why Did Cotton Imports Continue To Soar In October?
According to the statistics of the General Administration of Customs, in October 2022, China imported 129500 tons of cotton, an increase of 46% year on year and 107% month on month. Among them, the import of Brazilian cotton increased significantly, and the import of Australian cotton also increased significantly. Following the year-on-year growth of 24.52% and 19.4% of cotton imports in August and September, the import volume of foreign cotton in October increased significantly, but the year-on-year growth was unexpected.
In sharp contrast to the strong rebound of cotton imports in October, China’s cotton yarn imports in October were about 60000 tons, a month on month decrease of about 30000 tons, a year-on-year decrease of about 56.0%. China’s total cotton yarn imports fell sharply again after a year-on-year drop of 63.3%, 59.41% and 52.55% respectively in July, August and September. According to the statistics of relevant Indian departments, India exported 26200 tons of cotton yarn in September (HS: 5205), down 19.38% month on month and 77.63% year on year; Only 2200 tons were exported to China, down 96.44% year on year, accounting for 3.75%.
Why did China’s cotton imports continue the momentum of soaring in October? The industry analysis is mainly affected by the following factors:
First, ICE fell sharply, attracting Chinese buyers to sign contracts to import foreign cotton. In October, ICE cotton futures had a sharp pullback, and the bulls held the key point of 70 cents/pound. The price inversion of internal and external cotton once narrowed sharply to about 1500 yuan/ton. Therefore, not only a large number of ON-CALL point price contracts were closed, but also some Chinese cotton textile enterprises and traders entered the market to copy the bottom in the main ICE contract range of about 70-80 cents/pound. Bonded cotton and cargo transactions were more active than in August and September.
Second, the competitiveness of Brazilian cotton, Australian cotton and other southern cotton has been improved. Considering that not only the output of American cotton in 2022/23 will decline significantly due to weather, but also the grade, quality and other indicators may not meet expectations. In addition, since July, a large number of cotton in the southern hemisphere has been listed in a centralized manner, and the quotation of Australian cotton and Brazilian cotton shipments/bonded cotton has continued to retreat (superimposed on the sharp decline of ICE in October), the cost performance ratio is becoming increasingly prominent; In addition, with the textile and clothing industry “golden nine and silver ten”, a certain amount of export traceability orders are coming, so Chinese textile enterprises and traders have been ahead of the pack to expand foreign cotton imports.
Third, China US relations have eased and warmed up. Since October, high-level meetings and exchanges between China and the United States have increased, and trade relations have warmed up. China has increased its inquiries and imports of American agricultural products (including cotton), and cotton using enterprises have moderately increased their purchases of American cotton in 2021/22.
Fourth, some enterprises concentrated on the use of sliding tariff and 1% tariff cotton import quota. The additional 400000 ton sliding tariff import quota issued in 2022 cannot be extended and will be used by the end of December at the latest. Considering the time of shipment, transportation, delivery, etc., cotton spinning enterprises and traders holding the quota will pay close attention to purchasing foreign cotton and digesting the quota. Of course, since the decrease in the price of cotton yarn from bonded, shipping India, Pakistan, Vietnam and other places in October was significantly lower than that of foreign cotton, enterprises tend to import cotton for export orders of medium and long lines, and deliver after spinning, weaving, and clothing to reduce costs and increase profits.
Post time: Nov-26-2022