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China may revert to cotton imports

China is poised, after six years when its cotton consumption has tumbled by one-third, to revert to raising its demand for the fiber – although that will not prevent a further fall in international prices. Cotton demand in China, the top consumer of the fiber, in 2016-17 will grow by a million bales.

An increase would be the first since 2009-10, when it reached a record 50 million bales, before China's policy of providing guaranteed and elevated values for growers, in keeping domestic prices far above international ones, rendered its mills uncompetitive.

For several years, China’s cotton price support policy was a detriment to cotton consumption. However, the prospect of extra supplies hitting the market bodes will for prices, which will average 67 cents a pound next season. Weak world demand growth, and low prices of manmade fibers such as polyester, besides the pressure of China's surplus disposal policies are blamed for undermining cotton price prospects.

Fears of China opening up its stake reserves, which are estimated at 49 million bales, to hefty sales have been cited as a big reason behind the fall in New York cotton futures this week to the lowest since 2009. However, an end to the retreat in Chinese cotton imports is expected. These are projected to stabilise at five million bales in 2016-17.