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Reliance on overseas cotton likely to be strong

Mar '07
Being world's largest cotton-producing country, China's cotton output in 2006 reached 672.91 million tons. However, due to larger scale of textile industry, cotton demand is far above cotton output. In 2002 supply and demand was balanced on the whole. In 2003 China started to import cotton and in 2006, reliance of cotton market on the outside world climbed to 35 percent. Hence, domestic cotton price is higher than cotton price in international market.

India is the world's third largest cotton producing country after China and the US. Currently, its cotton production is less than half of China's output, but because of the relatively smaller cotton textile industry, India is basically self-sufficient and so domestic cotton price is lower than that in international market.

From the international cotton market forecast for 2007, global cotton production is expected to be slightly lower than cotton consumption this year. Supply would be able to meet basic needs and cotton price is likely to go up through stabilization.

India's production will increase, not only to meet domestic market demand, but part of its cotton production will also be exported. Therefore, Indian domestic cotton price will remain lower than that in the international market.

Moreover, China's cotton consumption is expected to increase, the cotton shortfall is expected to reach around 4 million tons this year.

Only 890,000 tons of import quota have been issued. The remaining cotton imports should pay value-added tax to protect the interests of domestic growers. It is expected that domestic cotton price will be slightly higher than the international market price.

Due to strong domestic demand, Chinese dependence on imports reaches 35 percent. The instability in cotton output will lead to price fluctuations, which are adverse to cotton spinning enterprises.

On the contrary, although India's output is relatively modest, its domestic demand is smaller and cotton price is lower. Therefore, spinning enterprises that own cotton resources will always have strong cost advantages.

Fibre2fashion, News Desk - China

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