Chinese cotton imports hit all-time low

Chinese cotton imports reached an all-time low in September, as large domestic inventories reduced reliance on foreign supplies, at a time when economic slowdown is weighing on demand. China imported just 50,900 tonnes of cotton in September, a decline of 59 per cent YoY. This is the lowest monthly import since records began in 2005, and the second month of record low imports in a row. China Cotton Association says that Chinese imports for the first nine months of the year fell 42 per cent to 1.16 mn t.

Chinese cotton demand has been hit by a range of factors, including massive domestic stocks, a weaker industrial sector, and competition from synthetic fibres, which have become cheaper as a result of low petrochemical prices. Chinese inventories accumulated as result of government price support policies, which encouraged rising domestic production, while mills favoured cheaper imported cotton. The end of the price support policy left the government with ample stocks, while mills turned to domestic supplies, which were now priced at closer to international levels. The US Department of Agriculture sees Chinese cotton imports falling to a 13-year low over the 2015-16 season..

?How far the market will ultimately slide depends mostly on China?s next move with regards to attempting to unload the massive stockpile,? said analyst Judith Ganes-Chase. State cotton inventories are estimated at 11 mn t, and a recent round of auctions had no success in attracting buying interest. The lack of buying was tied to the high prices demanded at auction, as a result of government reluctance to flood markets with cheap cotton, threatening prices for farmers. ?China was unsuccessful at selling the cotton by auction and may be forced to lower the price to make the cotton move, should this be the decision,? said Ganes-Chase. ?Previously it was felt that the Chinese government would simply hold the stock indefinitely, but the slump in the manufacturing sector could chose to unwind this stockpile sooner.?.

But there are concerns about the quality of Chinese cotton stocks, with large quantities of cotton that have been kept in bales for several years, which can cause the fiber to become brittle and difficult to spin. And these concerns could leave the door open for imports of high quality product when customs contracts are reassigned over the last three months of 2015. Cotton group Reinhart noted hat China was seeing a shortage in good quality cotton. ?As harvesting is progressing, concern about the quality output in Xinjiang is rising,? the group said. ?It is expected that high quality cotton including imported origins will be in good demand and fetch some premiums.?.