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China cotton quota price to slip on narrower price gap

Rumors about China’s allocation of cotton quotas keep rolling out now-a-days. One rumored version is that among total quantity of 894kt of quotas, 300kt to state-owned enterprises under 1 per cent tariff, 160kt to other eligible textile mills under 1 per cent tariff and 434kt of processing trade quotas.

In another version, 250kt to state-owned enterprises, 150kt to other eligible textile mills and 494kt of processing trade quotas. Moreover, it was heard that some mills have received the notice to apply for the quotas, but according to our sources, most mills did not get this notice. If the quotas do not allocate before the Chinese Lunar New Year, it may be allocated till end Feb, 2016.

As far as importers are concerned, it is a bearish news for them as it is more difficult to get ordinary trade quotas. For quota prices, it is supposed to decrease evidently. In general, the price of cotton quotas depends on the price gap between Chinese cotton and international cotton. Nevertheless, prices are affected by the supply and demand sometimes.