In 2018/19, China imported more than 2 million bales of Australian cotton. However, since the outbreak of the new crown epidemic, demand for Australian cotton has dropped sharply. From August 2019 to June 2020, China imported only 776,000 bales of Australian cotton, about 169,000 tons, part of which was Australian cotton from the bonded area. There is currently no evidence that reduced Australian cotton has been replaced by higher-grade US cotton.
According to analysis by foreign sources, since the outbreak of the epidemic, the consumption of long-staple cotton has dropped by 60%. In the past month, the demand for long-staple cotton has begun to recover, and American Pima cotton has also seen new sales. The recovery of Australian cotton sales has been slower, but it has also begun. The basis of long-staple cotton has dropped by about 1,000 points from the level before the epidemic, which has also stimulated sales to a certain extent.
Currently, the price of cotton yarn has not improved, and cotton mills are still unwilling to increase raw material inventories. China’s textile and apparel exports have recovered slightly from previous lows, but demand for high-count yarns remains weak, and European and American brands and retailers have shifted procurement channels outside of China. At the same time, the recovery of global luxury goods lags far behind. Chinese textile factories basically do not use Australian cotton, and the recent increase in textile and clothing exports is mainly of basic grades.
In the long term, the demand for Australian cotton in 2020/21 is weak, and the basis difference of most cotton merchants’ Australian cotton quotations in 2020/21 is still much higher than that of Australian cotton, US cotton, and Brazilian cotton in 2019/20. The basis difference of Brazil’s M 1-5/32 in 2020/21 is 500 points (March or May contract), while the basis of Australian cotton is as high as 2100-2200 points. It should be feasible to replace American Pima cotton with Australian cotton, but In the M-level series, Brazilian cotton is undoubtedly a very good choice. The length of cotton in Bahia, Brazil, has increased significantly this year and may soon have a fiber length of 1-3/16.
In addition to China, imports of Australian cotton by Vietnam, another buyer of Australian cotton, also dropped by more than half, importing only more than 60,000 tons in 2019/20. At present, Vietnam’s cotton consumption remains strong, cotton yarn exports to China are increasing, and clothing’s market share in the United States is expanding. Vietnam’s import demand for Australian cotton is expected to double in 2020/21. </p
