On September 1, the National Development and Reform Commission officially issued the “Announcement on Matters Concerning the Application for Import Quotas at Preferential Tariff Rates Beyond the Cotton Tariff Quota in 2020.” First of all, according to the content of the announcement, it can be seen that the main purpose of issuing cotton import quotas with preferential tariff rates in addition to the cotton tariff quotas (referred to as cotton import sliding tax quotas) is to ensure the cotton needs of textile enterprises. Specifically, it can be understood from the following aspects.
1. According to the announcement, 400,000 cotton import sliding tax quotas will be issued this time tons, all of which are non-state trade quotas and are limited to imports through processing trade.
It is understood that the issuance of sliding tax quotas is partly based on the background of the continued deterioration of profits of textile companies. It focuses more on ensuring the use of raw materials by export-oriented foreign trade textile enterprises. Since Zheng’s cotton exceeded 10,000 yuan this year, cotton prices have continued to rise, but cotton yarn prices have not improved significantly. Especially in July and August, textile companies’ yarn processing profit losses further expanded.
At the end of August, some pure cotton carded ring-spun high-quality 32-count cotton yarn suffered a loss of more than 1,000 yuan per ton. Therefore, textile companies are in urgent need of low-priced raw materials to stabilize profit losses. Since the reserve cotton was released in July, the cost-effective reserve cotton has met the needs of some textile enterprises, but still cannot meet the needs of most textile enterprises. If sliding tax quotas are issued, it will help textile companies purchase a certain amount of imported cotton at low cost to meet their low-price raw material needs.
2. As of the end of August, the inventory in China’s main ports remained at about 550,000 tons. The high level of imported cotton inventory at the port is difficult to reduce. Many warehouses such as Qingdao Port and Zhangjiagang are full, and some imports Cotton has even been transferred to inland warehouses. The issuance of additional imported cotton quotas will help imported cotton traders accelerate the digestion of existing uncleared ports at ports, and to a certain extent will also help reduce port storage pressure.
3. The current domestic demand is insufficient and the supply side is still loose. The issuance of additional sliding tax quotas will inevitably increase the effective domestic supply. However, compared with the additional issuance of sliding tax quotas in 2018 and 2019 (800,000 tons each), the current issuance of 400,000 tons is in line with the market digestion process. At the same time, the sliding tax quota can avoid the impact of imported cotton at too low prices on domestic cotton. The impact of high-priced cotton imports can also appropriately reduce the barriers to enterprises caused by high-priced imported cotton. Therefore, the form and quantity of quotas issued this time are completely within the acceptable range of the market.
4. Recent market rumors indicate that some textile companies have restricted the use of Xinjiang cotton due to US orders requiring the origin of raw materials, which has had a certain impact on the mentality of textile companies. In the relationship between China and the United States, Before Xinjiang-related issues are alleviated, this quota may provide a buffer for some textile companies, especially export-oriented foreign trade textile companies, to appropriately increase the import of cotton, reduce the current pressure to a certain extent, and is also in line with the implementation of the country’s support policy for export-oriented foreign trade companies in the early stage. .
So, from the upstream and downstream of the cotton industry, the issuance of sliding tax quotas is more focused on solving the contradiction between upstream and downstream supply and demand structures, and will not have any impact on domestic futures and spot prices. It will have a big impact, or it may have some support for the price of US cotton in the external market. </p
