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Cotton from reserves fails to appeal Chinese textile firms
Jan '13
Cotton being released from Chinese state reserves is proving to be less attractive to domestic textile enterprises.
On the first day of open auction, 38,000 tons of cotton grade 3 was released from the reserves at 19,000 yuan/ton, basically in line with market expectations.
More than 90 percent of the released cotton was old, procured over two years ago by the state agency, and it proved to be less attractive to textile enterprises.
The release announcement did not mention total quantity of cotton to be released nor the release period. It also did not mention the 3:1 matching ratio, i.e. 1 ton of import quota for every 3 tons of cotton released from cotton reserves. However, the announcement mentioned that the enterprises participating in auctions could apply for cotton import quota.
According to experts, Chinese Government will release cotton from its reserves in a step-by-step manner. It will first release old cotton and then gradually release reserves from 2011 cotton in small batches.
As a result, the release of cotton from state reserves will only have moderate and short-term impact on the market, according to analysts.

Fibre2fashion News Desk - China

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