As concerns about the spread of the new coronavirus intensify and India’s cotton export target is expected to be easily achieved, India’s exports of about 250,000 cotton bales (1 bale = 170 kg) to China have been put on hold. Indian trade officials said the two sides would negotiate to deal with the contracts if the situation was not brought under control soon. After banning exports to China, this is another time the Indian government took advantage of the new pneumonia to add insult to injury.
According to trade sources, as of early February this year, India has signed export agreements for 2.3 million bales, of which 1.8-2 million bales have been shipped. There are still about 2.7 million bales of cotton to be exported (CAI estimates that 2019 /India’s overall exports in 2020 reached 5 million bales); USDA’s latest monthly report predicts that India’s cotton exports this year will be 827,000 tons (about 4.87 million bales). From a quantitative point of view, nearly 50% of the contracted export volume of Indian cotton has been completed.
Some international cotton merchants and import companies said that the fundamental reason why Indian export companies broke the contract on the pretext of the spread of the epidemic and the intentional delay of bilateral cooperation by Chinese banks and ports was other yarn mills in Bangladesh, Vietnam, and Indonesia. Indian cotton orders for 2019/20 are relatively strong and contract prices have increased significantly compared with November/December (ICE’s main contract increased by 71 cents/pound from 64 cents/pound), which reflects the corporate reputation and government image. A few cotton yarn traders and weaving companies are worried that Indian yarn mills and exporters are likely to default on the “futures yarn” signed in February, March, and April or require the signing of new contracts.
Industry insiders analyze that although the global supply of high-quality cotton is tightening in 2019/20, Indian cotton is in a price “depression”; although the first phase of the Sino-US trade agreement is being accelerated and implemented, even if Without the “black swan” of the new crown epidemic, the amount of Indian cotton signed by Chinese companies to import in 2019/20 will not increase significantly. If the Indian government and companies break the contract, they will eventually “shoot themselves in the foot”:
First, the grade and quality of Indian cotton in 2019/20 continued to decline due to rainfall, which did not match the actual consumer demand of Chinese traders and textile companies (Gujarat S-6 not only significantly reduced production but also had poor quality); second, according to the Sino-U.S. trade agreement, in 2020 China will sign a large number of contracts to import US cotton in 2019/20, and Indian cotton is only an option after US cotton, Australian cotton, and Brazilian cotton; third, Indian cotton is “not of high quality and low price” under the protection of MSP and the government. Not honest.” Judging from the survey, the current quotation for Indian cotton M 1-1/8 for the January/March shipment is 75.75-76.5 cents/pound (strong 28GPT), while the quotation for EMOT/MOT of the same quality is only 76.5-77.5 cents/pound. (ME quotation is 74-75 cents/pound); Fourthly, due to the impact of the epidemic and the extension of the resumption period of cotton textile enterprises, the probability of cotton consumption declining is relatively high. The balance of domestic cotton supply and demand is gradually tilting, and the demand for medium and low-quality cotton cannot be avoided. decline (including Indian cotton); coupled with the obvious trend of Xinjiang cotton output remaining flat or slightly declining year-on-year in 2019/20, Indian export companies’ breach of contract plays into the hands of some traders.
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