China Sells from Reserve to Accommodate Textile Companies
The total amount to be sold isn’t known, but mills will be limited to buying one month’s supply of cotton fiber.
September 5, 2012
Like other nations that see fast and steady economic growth, China is experiencing some growing pains – much of them related to rising labor costs. Higher costs means China can no longer thrive by being the lowest-cost provider, and must shift its textile industry toward producing higher-quality goods to account for the higher production costs.
Chinese textile manufacturers, however, have been complaining recently about higher raw material costs, which have prompted the national reserve to issue more quotas for imported cotton as well as to sell some of the cotton from its massive reserves.
Xi Jin, manager of the international cooperation department with the China National Cotton Information Center (CNCIC), told Cotton International, “While the China National Cotton Reserves Corporation has not revealed exactly how much cotton it will sell from the reserve, textile mills won’t be able to purchase massive quantities. The maximum amount that can be purchased is one month’s use.”
Textile companies that have already used their previously issued import quotas for 2012, as well as those manufacturers who haven’t received quotas at all for this year, will be allowed to apply for additional quotas with the National Development and Reform Commission (NDRC) until Sept. 15.
July prices for imported cotton in China averaged about $1.06/lb, while domestic cotton came in significantly higher at $1.31/lb. The current selling price for reserve cotton is $1.38/lb. “Cotton purchasing will take place between 3:00 PM and 4:30 PM each working day,” Xi Jin said, “and the premium and discount is 3% for grade difference and 1% for length grade.”