Another Chinese invasion! India's cotton exports in trouble

Chinese government was expected to start sales from its cotton reserves on March 6

India’s cotton exports are likely to decline by 20 per cent this year, following the Chinese government’s decision to auction its own fibre stock.

Indian exporters will thus not be able to reap the benefit of high international prices. Exports estimated to be 5.5 million bales against last year’s 6.9 million, according to industry estimates.

The Washington-based International Cotton Advisory Committee (ICAC) said the Chinese government was expected to start sales from its cotton reserves on March 6 and would continue offering 30,000 tonnes a day until August.

“Last year, around 2.6 million tonnes were sold through the end of September. Assuming a similar volume is sold this year, the total volume held by the Chinese government will reach six million tonnes by the end of 2016-17.

China’s total stocks, including those in the private sector, are forecast to reach nine million tonnes at the end of 2016-17, accounting for 53 per cent of world stocks,” it added.

“This will definitely hit cotton demand from India as Chinese buyers have been active over the last few years. Indian exporters are cancelling orders due to higher realisation in domestic sales,” said Darshini Kansara, research analyst, Care Ratings.

Trade sources estimate Indian exporters have so far registered for 4.2 million bales (0.71 million tonnes, of which 3.7 million bales have already been shipped.

The Cotton Advisory Board under the textiles ministry estimated in October India’s total cotton exports would be 5 million bales (0.85 million tonnes) this year as against 6.9 million bales (1.17 million tonnes) last year.

“Exports will not surpass 5.5 million bales (0.94 million tonnes) this year,” said Arun Dalal, an Ahmedabad-based cotton exporter.

Despite a cotton acreage 9.6 per cent less than the previous year, better yields in major cotton growing states have resulted in higher output estimates. India’s cotton production in 2016-17 is estimated to reach 32.51 million bales (5.53 million tonnes), up from 30.01 million bales (5.10 million tonnes) a year ago.

The global market balance is going to remain tight which could keep prices elevated. “If cotton prices decline, imports will go up. But, China’s auction may cause prices in the global market to decline,” said Arun Sakseria, a trader.

Photograph: Reuters