Since the sino-us trade war, the Chinese government announced that imposing a 25% tariff on U.S. $50 billion goods, an important textile industry raw materials including cotton, caused by the turbulence of cotton prices, many traders also focus on cost-effective cotton in India.
Cotton prices have been rising overall since bottoming out in April 2016, which is closely related to global de-stocking in the context of a large cycle.
Historically, there has been a strong negative correlation between global cotton prices and inventories, that is, falling inventories correspond to a rising price range.
According to a forecast released by the U.S. department of agriculture in June, global cotton production in 2017/2018 was 2.6728 million tons, while global cotton production in 2018/2019 was 2.6214 million tons.
Global cotton consumption was 2.6294 million tons in 2017/2018, and 2.7293 million tons in 2018/2019.
The global cotton ending inventory in 2017/2018 was 1.9204 million tons, and the inventory consumption ratio was 73.04%, while the global cotton ending inventory in 2018/2019 dropped to 18.075 million tons, and the inventory consumption ratio was 66.23%.
Relative to the world, the domestic cotton destocking is more severe, the emphasis of which is on the agricultural supply side of the reform under the state storage cotton inventory destocking.
Since the large-scale dumping and stockpiling in 2016, the national storage cotton inventory has dropped from about 11.14 million tons to the recent 3.9 million tons, and the inventory has decreased by 65%, that is, nearly two-thirds of the national storage cotton has been effectively digested.
With the continuation of the later period, the national storage cotton inventory will further decline.
According to current estimates, by the end of this year's dumping, the amount of cotton stored in the country will drop to about 2.5 million to 3 million tons, close to the domestic cotton consumption in three months, reaching the border of safe stocks.
It is expected that after the entry into 2019, the state reserve cotton will no longer carry out the net delivery, but will mainly rotate in.
Correspondingly, in order to meet the production and demand gap, China will increase the import of cotton from the world.
It is against this background that the national development and reform commission recently increased the tax quota of 800,000 tons.
From the perspective of the balance of supply and demand, it is expected that it will become the norm for China to supplement the domestic gap by importing 3 million tons of cotton in the future.
However, the us cotton that we think will fill the gap in China's cotton consumption in the future is full of uncertainty as the sino-us trade friction escalates.
On June 16, the state council decided to originate in the United States of imposing a 25% tariff item about $659 and $50 billion goods, including agricultural products, such as about $34 billion in goods since July 6, 2018, contains not combed cotton and cotton linter.
According to statistics, China imported 1.15 million tons of cotton in 2017, of which 505,300 tons came from the United States, accounting for 44%.
As soon as the news came out, cotton market prices immediately began to fluctuate.
As trade wars intensify, so will the cotton price system.
The most obvious is the direct impact of the tariff on imported cotton. After the tariff increase, the tariff rate of imported American cotton within the quota will rise from 1% to 26%, and the corresponding import cost will be directly increased by more than 3,500 yuan/ton.
Therefore, the tariff on the increase in the cost of cotton imports is obvious.
In this case, it is obviously not cost-effective to import American cotton, so many textile mills and traders have turned their attention to Indian cotton.
India has signed half a million bales of new cotton export orders with China, according to the Indian cotton association, a rare early lock on supplies.
A Indian cotton exporters also revealed that the recent company received many inquiry from China to India for the next fiscal year cotton has been signed and China in early June this year 11 ~ 12 months the cotton export orders for shipment.
And some international cotton traders and Indian exporters, as bilateral trade dispute upgrades, India cotton exports on the "fast track", China's more positive on cotton import quotas, cotton importers at present in China has a strong interest in the international market with high quality cotton purchasing, especially high quality S - 6, MCU5, J34 is part of China's large and medium-sized FangQi attention and favor.
Indian cotton association, investment institutions, the cotton enterprises believe that because of the influence of sino-us trade dispute intensified, Chinese cotton imports will be forced to find other varieties instead of American cotton, cotton export orders in India will surge, 2018/2019 Indian cotton exports to China soared to 5 million packages, about 850000 tons, the 2017/2018 annual turn over five times.
On the premise that China imposes import tariffs on American cotton, Indian cotton will have the opportunity to occupy a larger market share in China and become the only alternative for Chinese textile mills and traders to replenish cotton resources.
To this, the analysis of the personage inside course of study, stimulate Indian cotton short sell because in addition to a trade war with China "imminent" outside, still have the following three points: first, on June 14, the Chinese government to raise the 800000 tons of sliding quasi cotton import tariff quotas, all for the state-run trade quotas, cotton imports of the initiative, the decision of foreign enterprises have improved;
Secondly, from mid-may to mid-june, ICE cotton futures led spot prices of American cotton, Australian cotton, Brazilian cotton, African cotton and other commodities to rise sharply. Indian cotton has a relatively prominent cost-performance advantage.
, according to data on July 2, imports of cotton price rose slightly, among them, the E/MOT cotton delivery price is 15436.87 yuan/ton, Australian cotton delivery price is 16651.77 yuan/ton, pick up the goods of India's cotton price of 14769.31 yuan/ton.
Third, the recent sharp depreciation of the Indian rupee, the import cost of Chinese enterprises fell;
In addition, compared with American cotton, Australian cotton and African cotton, Indian cotton has the advantages of short transportation distance, low freight cost and fast delivery, so its export to China presents a short-term "blowout" trend.