May 11, 2012

China's fresh cotton import quotas seen at one million tonnes

To meet demand from the textile sector, China is estimated to have further issued up to one million tonnes import quotas, trading executives said Thursday (May 10).

Textile mills, whose margins are getting thinner amid strong local cotton prices, have welcomed the move.

Of the one million tonnes, about 60% will be allocated to textile mills and the rest to the state stockpiler, a Qingdao-based cotton importer said.

"Textile mills are expected to get the quotas as early as next week," the Qingdao trader said.

However, an executive of a Guangdong-based trading company said more than 700,000 tonnes will go to textile mills and the rest to state-owned companies, but didn't elaborate.

The trader also said the government will likely release an official notice next week, adding that some textile companies already know the size of their allocations.

In a research note released Thursday, Tianqi Futures said one textile company confirmed it has received import quotas from the local economic planner.

Cotton imports will likely surge in the next few months and domestic prices will face downside pressure, analysts said.

Benchmark September cotton on the Zhengzhou Commodity Exchange closed 0.8% lower at RMB20,490/tonne (US$3,251).

China issued 1.5 million tonnes of import quotas at the beginning of the year, including 894,000 tonnes under a 1% tariff.