According to customs statistics, in August 2023, my country’s cotton import volume was 175,500 tons (a year-on-year increase of 62.28%), and cotton yarn import volume was 185,800 tons, (a year-on-year increase of 155.78%); in September 2023, my country imported 235,600 tons of cotton. (a year-on-year increase of 165.93%), and the import volume of cotton yarn was 184,700 tons (a year-on-year increase of 107.00%). According to data released by the China Cotton Association and other organizations, the national cotton consumption in 2023/24 is 7.9 million tons, with an average monthly demand of 658,300 tons. Judging from the substantial growth in cotton and cotton yarn imports in recent months, my country’s cotton consumption Pressure builds.
Judging from the current feedback from all parties, there is not much hope that the momentum of my country’s cotton and cotton yarn imports in 2023/24 will peak and fall back in the short term. It may continue to put pressure on domestic cotton supply and current prices, and the replacement rate of domestic cotton is still ” It’s easy to increase but hard to decrease”.
First, the cotton import quota in the first half of 2023/24 is very sufficient. Coupled with the sliding quasi-tariff and the 1% tariff, the domestic and foreign cotton prices are still relatively high. The enthusiasm of Chinese companies to sign contracts to purchase imported cotton is difficult to cool down. The 750,000 tons sliding quasi-tariff cotton import quota can be extended until the end of February 2024, which only extends the period for Chinese companies to import foreign cotton and does not change the quota usage rate or import volume.
Second, new export orders from foreign trade companies, garment companies and weaving factories are still based on short orders, small orders and bulk orders. In order to save time on cotton procurement, cotton distribution and order arrangement, cotton yarn processing, transportation, etc., we strive to deliver on schedule. For goods, OEM companies may only continue to choose to purchase port-bonded/customs-cleared cotton yarns from Vietnam, India, Pakistan and other cotton yarns from the perspectives of timeliness and profit.
Third, from the perspective of the external environment, it is difficult for Chinese companies to stop importing cotton/cotton yarn. In addition to the continued warming of China-U.S. relations and China-Australia relations, which require Chinese companies to expand purchases of U.S. agricultural products, the settlement of cotton trade between China and Brazil in RMB will also accelerate (on March 29, 2023, China and Brazil announced a new agreement— –Trade between the two parties is settled in local currencies and no longer uses the U.S. dollar as an intermediary), and the “threshold” for foreign cotton to enter the Chinese market has been further lowered. It is worth noting that this year, Pakistan, other American countries, and African countries are more enthusiastic about exporting cotton to China.
Fourth, the RMB exchange rate against the US dollar has entered a period of appreciation and stabilization, which is beneficial to the import of cotton/cotton yarn and other products. Industry analysis shows that as China’s economy bottoms out, seasonality becomes positive, capital outflows slow, the Fed and the People’s Bank of China’s monetary policies will gradually converge, and Sino-US relations show signs of stability, the period of greatest depreciation pressure faced by the RMB may have already begun. Finish. USD/CNY is likely to remain within the 7.25-7.35 range during the year, as seasonal demand will drive appreciation of the RMB on year-end eve and before the Lunar New Year.
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