The Trade War Is Beginning To Win. Who Will Host The Cotton Market In China?

Textile trade friction has been affected.

In June 15th, the United States announced a tariff increase of 34 billion dollars on Chinese products; in June 16th, the State Council decided to levy a 25% tariff on 659 commodities originating in the United States of about 50 billion dollars, of which about 34 billion U.S. dollars of agricultural products were executed in July 6, 2018, including uncombed cotton and cotton short cashmere.

As early as then, news of cotton prices caused turbulence, and many traders turned to pay attention to India cotton with cost-effective.

What is the basic demand and supply of cotton nowadays? In the context of trade war, can India cotton which is driven by the "fast lane" to replace the US cotton and seize the share of the US cotton market in the Chinese market?

Since the massive dumping in 2016, the national cotton stocks have dropped from 11 million 140 thousand tons to 3 million 900 thousand tons in the near future. After the end of this year, the number of state cotton stocks will be reduced to about 2 million 500 thousand ~300 tons, reaching the border of safe stock.

It is expected that after 2019, the national cotton will no longer be put into the net, but will be mainly driven by wheels.

Correspondingly, in order to meet the gap between production and demand, China will import cotton to supplement its consumption.

Some time ago, the national development and Reform Commission increased the policy of 800 thousand tons of quasi tax quotas.

From the perspective of supply and demand balance, China will hopefully become the norm in the future by importing 3 million tons of cotton to supplement domestic shortfalls.

But the US cotton that will fill our cotton gap in the future will be full of uncertainty with the escalation of Sino US trade frictions.

According to statistics, China imported 1 million 150 thousand tons of cotton in 2017, of which 505 thousand and 300 tons came from the United States, accounting for 44%.

Once the tariff message was added, the price of cotton market immediately became turbulent.

As the trade war intensifies, the cotton price system will also change.

The most obvious is the direct effect of tariffs on imported cotton. After raising tariffs, the rate of import of US cotton will increase from 1% to 26%, and the corresponding import cost will increase by 3500 yuan / ton directly.

Therefore, the promotion of tariff to cotton import cost is obvious.

In this case, the import of American cotton is obviously not cost-effective, so many textile enterprises and traders shifted their attention to India cotton.

According to the India Cotton Association, India has signed 500 thousand new cotton export orders with China, which is very rare.

A cotton exporter in India also revealed that recently, the company received many inquiries from China on India cotton next year. In early June, it signed a cotton export order with 11~12 in China this year.

There are also some international cotton traders and export enterprises in India. With the escalation of Sino US trade disputes, India cotton exports are on the "fast track" and are favorable to China's issuance of cotton import quotas. At present, China's cotton importers are interested in high quality cotton procurement in the international market, especially high quality S-6, MCU5 and J34.

India Cotton Association, investment institutions and cotton companies believe that China's cotton imports will be forced to look for other varieties instead of American cotton due to the increasing trade disputes between China and the United States. India's cotton export orders will surge sharply. The export volume of cotton to China in 2018/2019 may increase to 5 million packages in, about 850 thousand tons, five times higher than that in the year of 2017/2018.

Under the premise of China's introduction of the US cotton import tariff, India cotton will have the opportunity to occupy a larger market share in China and become the best choice for Chinese textile enterprises and traders to replenish cotton resources.

China's cotton supply and demand remain variable, and India cotton exports are not optimistic.

Today, the import of cotton in India shows an increasing trend. Although the consensus has been reached in the industry, how much growth and growth will be affected by many factors besides the Sino US factors? India cotton exports should not be blindly optimistic.

According to the insiders, the first is the quantity of India cotton available for export in 2018/2019. From the feedback of parties such as India Cotton Association and USDA, India cotton planting area will decline 10%~13% in 2018, plus the arrival of the southwest monsoon postponed. The output of cotton in India is not optimistic in the year of 2018/2019. In addition, in recent years, the cotton consumption demand of high quality, high grade and high consistency in India has increased rapidly, and the export of S-6, MCU, J34 or less than 1 million tons. USDA predicts that the output and export volume of India cotton will be 6 million 205 thousand tons and 925 thousand tons respectively in the year of 2018/2019. If 850 thousand tons of cotton are exported to China, then how to solve the raw material problem of the cotton mills in Bangladesh, Pakistan and Turkey?

The escalation of Sino US trade frictions has greatly increased India cotton's chances of exporting to China, but it has also given African cotton, Brazil cotton, Australia cotton and Central Asian cotton to occupy the United States and cotton.

If the timing of share is not referenced to ICE, the price of India cotton CNF and FOB, which is independently priced, has no advantage over other cotton producing areas or even hangs upside down. I am afraid Chinese buyers must also place their orders carefully.

For example, since June 20th, the spot price of ICE and cotton has been greatly reduced, and India cotton price is only a symbolic callback.

On the one hand, in 2018/2019, whether domestic cotton output can reach 6 million ~620 million tons will decide the degree of dependence on imported cotton; on the other hand, with the pformation and upgrading of China's textile enterprises, the textile enterprises will focus on purchasing high quality and Gao Ke spun cotton, and how much proportion of India's lint can be exported to meet the needs of textile enterprises?

A multinational company in Beijing has said that China will first purchase machine picked, pollution-free cotton and Brazil cotton instead of American cotton, and then consider India cotton, because India cotton has a high impurity rate.

But if there is no other option, China will spend more money on cotton processing, because even if it is added to the cost, it will be cost-effective to buy US cotton more than 25% of the import tariff.

So on the whole, India cotton can replace the US cotton and seize China.

It is too early to say that the India cotton exports should not be blindly optimistic.

To say the least, the Sino US trade dispute is a "protracted war". Tariff policy still has great variables. For textile enterprises, we should rationally view market fluctuations and make strategic replenishment in the low price of cotton, so as to ensure normal production.