Cotton prices are supported by an expected rebound of Chinese demand on the international market after Beijing has suddenly released an additional quota of 800,000 metric tons on last Friday. Demand from Vietnam, Bangladesh and even India could further boost prices to higher levels whereas China’s cotton futures are already rebounding.
Cotton prices have been firm in the past week, over strong demand for US cotton on the physical market.
The nearby contract in New York has rebounded on last Friday , eventually finishing the week slightly lower than seven days earlier.
The monthly data from the US Department of Agriculture (USDA) have failed in stimulating the market, with only negligible changes being reported.
By contrast, USDA’s weekly export sales data have boosted prices with net sales reaching 289,000 running bales in the week ended April 4th.
More importantly, China’s NDRC has announced on Friday that an additional quota of 800,000 metric tons will be released under the so-called “sliding scale” regime.
It means that Chinese importers will be allowed to buy foreign cotton and pay lower tariffs than basic 40%.
This additional quota comes above the usual annual limit of 894,000 MT for benefiting from a 1% tariffs (instead of 40%).
The new quota allocations will be reserved for companies with 50,000 spindles and above, as a clear sign that the country could buy large quantities of foreign cotton in the coming period.
With the end of US-China trade negotiations looming, however probably not before May Day holidays, Beijing will commit purchasing large quantities of US agriculture products, including cotton.
On the domestic market in China, official sales from state reserves have not resumed yet, offering some strong support to domestic cotton prices with foreign cotton therefore staying competitive.
US cotton futures have typically rebounded in the last week in Zhengzhou.
As a consequence, New York’s cotton market should not be expected falling in the coming period, especially with the end of the season in sight and lower availability of the fiber.
Demand from India has reached 70,000 RBs in the latest report, reflecting the lack of supply in the country.
Bangladesha and Vietnam will also support New York prices in the coming period.
Source: Emergingtextiles
