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China`s cotton imports to jump as home crop fails
Shanghai, Nov 19: China `s cotton imports are expected to jump more than six times to 1.2 m tonnes in `03 due to a shortfall in domestic output and strong demand, an industry official said on Tuesday. But the market expects the import figure to be larger as the government will need to replenish falling stocks, a sentiment that is seen supporting global prices that hit five-year highs last month, traders said.
Shanghai, Nov 19: China ’s cotton imports are expected to jump more than six times to 1.2 m tonnes in ‘03 due to a shortfall in domestic output and strong demand, an industry official said on Tuesday. But the market expects the import figure to be larger as the government will need to replenish falling stocks, a sentiment that is seen supporting global prices that hit five-year highs last month, traders said.
China, the world’s biggest producer and consumer of cotton, needs about 7m tonnes of cotton annually in ‘03 and ‘04 to feed its booming garment industry, Shi Jianwei, director of the country’s Cotton and Jute Bureau, told reporters.
Despite a 20% rise in acreage, domestic cotton output this year would be less than 4.9 m tonnes due to excessive rains, while next year’s acreage was seen rising no more than 10% to about 5m hectares, he said.
China ’s buying spree and an expected disappointing output boosted New York cotton futures to five-year highs last month, with the December contract hitting 82.73 cents a pound on October 29, up 44% from the beginning of this year. The contract has since eased to close at 74.10 cents on Monday.
“Big volumes are still done at current prices, there is no doubt about that,” said a trader with a global trading firm in Shanghai . “The market has more upside.” Shi expects imports to jump this year, but he declined to give an estimate for ‘04.
It will even be tough for domestic and foreign firms to absorb high costs of cotton at $1 a pound and some operations might be forced to shut temporarily, output plans might be trimmed, while some companies might switch to chemical fibres, Shi said.
But the market expects imports to be higher than Shi’s figure, with forecasts inclining towards the US Department of Agriculture’s 7m bales, or roughly 1.5 m tonnes, traders said.
“His estimate is way too low. China ’s cotton stocks have been running low, and with such strong demand coming from the textile sector, our estimate for imports is much higher than that,” said a second trader with another international firm.
China’s import quotas for ‘03 totalled about 1.5 m tonnes, including 8,56,250 tonnes based on the country’s World Trade Organisation commitments, 1.5 lakh tonnes from quotas rolled over from last year and another 5 lakh tonnes of extra quotas issued late this year.
Bureau Report
Despite a 20% rise in acreage, domestic cotton output this year would be less than 4.9 m tonnes due to excessive rains, while next year’s acreage was seen rising no more than 10% to about 5m hectares, he said.
China ’s buying spree and an expected disappointing output boosted New York cotton futures to five-year highs last month, with the December contract hitting 82.73 cents a pound on October 29, up 44% from the beginning of this year. The contract has since eased to close at 74.10 cents on Monday.
“Big volumes are still done at current prices, there is no doubt about that,” said a trader with a global trading firm in Shanghai . “The market has more upside.” Shi expects imports to jump this year, but he declined to give an estimate for ‘04.
It will even be tough for domestic and foreign firms to absorb high costs of cotton at $1 a pound and some operations might be forced to shut temporarily, output plans might be trimmed, while some companies might switch to chemical fibres, Shi said.
But the market expects imports to be higher than Shi’s figure, with forecasts inclining towards the US Department of Agriculture’s 7m bales, or roughly 1.5 m tonnes, traders said.
“His estimate is way too low. China ’s cotton stocks have been running low, and with such strong demand coming from the textile sector, our estimate for imports is much higher than that,” said a second trader with another international firm.
China’s import quotas for ‘03 totalled about 1.5 m tonnes, including 8,56,250 tonnes based on the country’s World Trade Organisation commitments, 1.5 lakh tonnes from quotas rolled over from last year and another 5 lakh tonnes of extra quotas issued late this year.
Bureau Report