Hot sell for reserve cotton, cotton price remains high in China

Tranalysis Guangzhou: China planned to sell 1,682,700 tonnes of cotton in Jan. – July 2016. In fact, the actual accumulative transaction volume was 1,651,600 tonnes with the transaction rate of 98.15%. Specifically, the transaction volume of cotton produced in China was 1,355,300 tonnes, with the transaction rate of 98.15%; that of imported China was 296,300 tonnes, with the transaction rate of 98.16%.

The highest transaction price of cotton in China was RMB16,490/t, while the lowest was RMB9,730/t, and the average transaction price was RMB13,088/t in Jan. – July 2016.

Hot sell for reserve cotton, import volume of cotton falls sharply

On August 1, China National Cotton Reserves Corporation (CNCRC) planned to sell 30,000 tonnes of state reserve cotton (produced in China) while the actual transaction volume was 26,4 00 tonnes, with the transaction rate of 87.85% and average transaction price of RMB13,988/t.  

After the release of Policy on China Reserve Cotton 2016 in April, the domestic cotton prices were close to the overseas ones, which caused that the 894,000 tonnes of cotton, which was out-of-quota tariff, lost its price advantages in China.

Thus, domestic textile enterprises could only turn to use reserve cotton, which directly led to the decrease of import volume of cotton in Jan.-July 2016. According to China Customs, the import volume of cotton was 72,000 tonnes in June 2016, 7.7% down MoM and even 54.6% down YoY.

Cotton market price keeps rising

With the transaction rate of reserve cotton remaining high recently, the domestic textile enterprises were more active in raising the quotations. The highest transaction price was even over RMB16,000/t, hitting the historical high record. In the meanwhile, the excessive transaction price of cotton encouraged the cotton market price to increase. Up to 28 July, the market price of lint cotton in China was RMB14,500/t-15,500/t, up RMB800/t-1,100/t MoM, because the low cotton volume offered by the Chinese government could not reach the demand in the market.

Prediction on cotton price in H2 2016

It is predicted that the cotton price would decrease due to the slow demand for cotton after the peak stock-up period. However, influenced by the global weather, the cotton in India and Brazil was in short supply, and the international cotton price still remained high.

In addition, regarding to the demand from downstream, the price of cotton yarn increased then so did the price of greige cloth.

According to Tranalysis researches, some traders have already purchased and stored cotton to make more profits before the reserve cotton being put in the market by the Chinese government.

It is predicted that the cotton price would hold a high price in the near future.

About Tranalysis:

Tranalysis is an intelligence and analysis provider on import/export data covering agriculture, chemicals and life science industries in China. Tranalysis, founded in 2001, provides users not only large amount of import/export data in China, but also analysis to help monitor the market trends. Our clients include Monsanto, BASF, Syngenta, SinoChem and etc.

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