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Chinese cotton auction limited to spinners

Chinese cotton prices have been increasing. Ending stocks (excluding state reserved cotton stocks) are estimated at about 2.05 million tons in 2016-17, up compared to 1.31 million tons in 2015-16 and 1.58 million tons in 2014-15. For the 2016-17 season, Chinese cotton output is forecast at 4.60 million tons and cotton imports are estimated at 1.09 million tons.

Re-sold reserved cotton sales were slow and commercial stocks climbed up largely in August. Cotton inventory in mills did not reduce due to the extension of state cotton auction. By end August 31, 2017, the reserved cotton left in the state warehouses is estimated at 5.82 million tons, and Chinese ending stocks are projected at 7.87 million tons in total.

Only spinners are permitted to participate in the current state reserves auction from September 4 to 29. The move is designed to satisfy spinners’ production needs and limit stockpiling by traders. After the news was released, trading activities in physical market improved obviously and cotton prices rose. Mills did not slow down the tempo to purchase reserved cotton after traders were not permitted to take part in the auction. Trading sentiment of reserved cotton remained favorable. Higher feedstock costs weighed on spinners.