Cotton yarn prices climb on strong export demand from China and weak rupee

Cotton yarn prices rose over 10 per cent in two weeks, due to a sharp increase in demand from markets abroad, following rupee depreciation. Along with yarn, there has been an increase in orders for Indian Cotton from China , following a build-up in its trade war with the US. In a retaliatory measure.

India’s cotton shipments to China could grow five-fold to 5 million bales (850,000 tonnes) in the next crop year as exporters rack up orders amid a trade war that is forcing the world’s top consumer to look for other sources of supply.

The United States, the world’s biggest exporter of the fibre, had cornered the bulk of Chinese imports for at least a decade. But China’s decision to impose a 25 per cent import tax from July 6 on American farm commodities, including cotton, in retaliation for tariffs enacted by the administration of U.S. President Donald Trump will allow India to grab a bigger share of the Chinese market.

India has already signed contracts to ship 500,000 bales (85,000 tonnes) of their new season harvest to China, reports Reuters.

Strong demand from China could help lift India’s overall exports to as much as 10 million bales in 2018/19, highest in five years, as demand from traditional buyers like Bangladesh, Vietnam and Pakistan also remains healthy, said Ganatra.

For the 2017/18 crop year ending on Sept. 30, India is likely to export around 1 million bales to China. Chinese buyers would first try to replace U.S. cotton with machine-picked, non-contaminated fibre from Australia and Brazil, and then they would go for Indian cotton as Indian cotton is not free of impurities such as bits of leaves and empty bolls.

China is familiar with Indian cotton, and previously would buy as much as 6 million bales a year. At present, India also benefits from a depreciating rupee and nearness to China as compared with other competitors.

Along with lower freight rates, shipments from India reach China in about two weeks compared to an average of three to six weeks from other producers Australia and Brazil.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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