Recently, China Cotton Reserve Management Co., Ltd. and the National Cotton Trading Market jointly issued an announcement: From August 24, 2021 to the end of this year’s rotation, the reserve cotton rotation transaction will only be limited to textile cotton companies participating in the bidding, and non-textile cotton will be stopped. Cotton-using enterprises participate in the bidding; the reserve cotton purchased by textile cotton-using enterprises is limited to the enterprise’s own use and may not be resold.
Although the transaction rate still reached 100% in the four trading days from August 24th to August 27th, the average daily transaction price and dealer markup declined significantly. Cotton textile Enterprises’ demand for cotton is guaranteed, raw material costs are gradually declining, and the policy effects are “immediate.”
So what impact will the State Reserve’s cotton rotation stop non-textile cotton companies from participating in bidding have on foreign cotton imports? Judging from the feedback from some international cotton merchants and traders, there are three main points:
First, the establishment of a “Textile Enterprises Special” and a significant reduction in price increases have stimulated cotton spinning mills The bidding enthusiasm for port bonded, customs clearance and low-quality Indian cotton, West African cotton, and Brazilian cotton continues to weaken. According to the survey, the current net weight quotation of M 1-1/8 Brazilian cotton for customs clearance in Qingdao Port is 18,700-18,900 yuan/ton (trader), regardless of grade factors, which is nearly 1,500 yuan/ton higher than the current Xinjiang cotton of the State Reserve;
Second, textile companies have slowed down the use of sliding tariffs and 1% tariff cotton import quotas, and the shortage of quotas has not been alleviated. On the one hand, there are still more than 200,000 tons of reserve cotton to be auctioned before the end of the round at the end of September, which will have an increased impact on bonded and customs-cleared cotton at the port;
The third is the trader port Sentiment for shipments of bonded US cotton, Brazilian cotton, Indian cotton, etc. has increased, and bonded cotton quotations in RMB have increased (buyers need to bring their own 1% tax or sliding tax quota to pass customs), but the initiative is in the hands of cotton spinning companies with quotas, and it is a buyer’s market The characteristics appear, and traders’ preferential treatment and profit margins are expanded. </p
