Home / Knowledge / News / Textiles / Bizarre & enigmatic cotton situation confronts 2013
Bizarre & enigmatic cotton situation confronts 2013
Jan '13
As we enter a new year, we are confronted with one of the more bizarre and enigmatic cotton situations in recent memory. What makes price analysis currently so difficult is that we are essentially dealing with two entirely different markets - China versus the rest of the world. These two markets operate under markedly different price structures, with Chinese cotton and yarn imports creating an important link between the two systems.    

The pace at which the Chinese Reserve has been procuring domestic cotton via its auction mechanism this season is simply mind boggling. As of this week the Reserve has already absorbed close to 5.2 million tons (23.5 million statistical bales) into its stockpile, which equates to around 75 percent of the Chinese crop. Total Reserve stocks are now estimated at close to 10 million tons!

With local cotton being prohibitively expensive as well as in short supply, Chinese mills have continued to focus on imports of raw cotton and yarn, thereby siphoning off cheaper supplies from the rest of the world.

In the first four months of the current marketing year (August to November), raw cotton imports have already amounted to 5.3 million statistical bales, implying an annualized rate of nearly 16 million bales. Although that’s not quite as much as last season’s 24.5 million bales in imports, it would still be more than enough to neutralize the seasonal production surplus in the rest of the world, which according to USDA figures amounts to 14.4 million bales in 2012/13.

In addition to imports of raw cotton, China continues to be a keen buyer of foreign yarn, nearly doubling the pace of imports from the previous season to an annualized rate of around 6.5-7.0 million bale equivalents.

This in turn is boosting mill demand in places like Pakistan, India and Vietnam, who are the main suppliers of this yarn. Given the rather dramatic shift in mill consumption from China to other markets over the last three seasons, it is quite possible that mill use outside China is being underestimated, with recent anecdotal evidence pointing in that direction.

There have been rumors over the past couple of weeks that the Chinese government may start to release some of its stocks by forcing mills to take three bales of Reserve cotton at a price of 19,000 Yuan/ton (= 138 cents/lb) for every bale that they are allowed to import under a sliding scale duty. Although this price would be cheaper than the 20,400 Yuan/ton the Reserve has been paying to farmers, it is still very expensive when compared to international values.

Some traders fear that such a 3:1 ratio scheme may have a negative market impact, but we don’t believe that to be the case. There may be an initial knee jerk reaction when the new policy is announced, but what matters in the long run is that imports are likely to continue, albeit at a reduced rate.

This is important in regards to international cotton prices, because if plantings in the rest of the world were to drop by 15 percent next season and demand increased by a modest 2 percent, then production and mill use would be at about the same level outside China.

Must ReadView All

Textiles | On 27th Mar 2017

Himatsingka to disinvest 100% stake in Italian subsidiary

The board of directors at Indian home textiles manufacturer and...

Courtesy: Flipkart

Apparel/Garments | On 27th Mar 2017

Flipkart bags $1bn funding at lower valuation

In a new round of funding, Flipkart, one of India's biggest ecommerce ...

Textiles | On 25th Mar 2017

GST to positively impact retail value chain: CBRE

The implementation of the Goods and Services Tax (GST) bill in India...

Interviews View All

Asim Dalal
Indo Count Retail Ventures

Today, there is no other emerging market as India, "we make in India and...

Karan Toshniwal
Orange O Tec

Contemporary industry is paying more and more attention to the...

Frank Gossmann
Rotorcraft AG

‘RT3 motto is: Do not check millimetres, check colours.’

Mohammad Hassan
Biax Fiberfilm

About one in every 20 patients picks up an infection while hospitalised....

Kevin Nelson

Kevin Nelson, Chief Scientific Officer, TissueGen discusses the growing...

Johan Berlin
InvestKonsult Sweden AB

Investkonsult Sweden AB has been buying and selling second-hand textile...

Prathyusha Garimella
Prathyusha Garimella

Hyderabad-based designer <b>Prathyusha Garimella</b> is known for blending ...

Karan Arora
Karan Arora

Bridal couture created with rich Indian heritage, exquisite craftsmanship...

Robert Brunner

Golfwear and menswear brand Devereux is set for greener pastures. Robert...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


Letter To Editor

(Max. 8000 char.)

Search Companies

March 2017

March 2017

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.


Browse Our Archives


Subscribe today and get the latest News update in your mail box.
Advanced Search