By Lin Tan
DTN China Correspondent
BEIJING (DTN) -- China cotton imports continue to plummet as government policies encourage textile manufacturers to use domestic supplies and low oil prices drive increased use of synthetics.
Official data from the China General Administration of Customs pegged December's cotton imports at 188,000 tons, making the year's total 1.47 million tons. That's down 40%, or almost 1 million tons, from 2014.
Imports could drop another 40% in 2016 and possibly fall short of the 894,000 ton import quota China's required to provide the industry under its World Trade Organization agreement, said Ruining Li, who works at Chanson Textile Company, one of China's largest textile companies in Hebei Province, which is near Beijing.
The government will often offer higher import quotas than required, but didn't offer as much last year as in previous years. "But lower domestic cotton prices and the usage of synthetic fiber also contributed to the lower cotton imports," Li said.
Like corn, China built a large stockpile that's estimated at 11 million tons, a historic high, according to government sources. China terminated the floor price policy on cotton in 2014 that paid farmers above market prices. Cotton prices became more market oriented as the price gap between domestic cotton and imported cotton sharply decreased.
In August 2014, the price difference was more than $0.44 per pound. Now, Li's local prices are about $0.87 per pound while imported cotton is $0.81 per pound.
"The price difference is only RMB 900 per ton ($0.06 per pound), much lower than two years ago," Li said. "In the meantime, lower crude oil prices recently had pushed down synthetic fiber prices and made it more competitive than cotton."
China imported 4.15 million tons of cotton in 2013, but that dropped to 2.44 million tons the next year before falling to its current low level.
China's policy change may have resulted in lower prices, but the government's reserve is still record large.
"The market is talking that the state reserve will sell more than 2 million tons of cotton to the market at a lower price this year. This may put futures pressure on cotton prices and make imported cotton not profitable," Li said.
Of the 894,000-ton quota China's required to make available to textile companies, only 33% goes to state-owned companies. But if the government does dump its reserve on the market, pushing prices below that of imported cotton, Li thinks "China could import close to, or even less than, the 894,000-ton quota of cotton in 2016."
(SK)
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