China’s 2020/21 cotton imports driven to 7-year high on strong consumption, state reserve demand

China’s 2020/21 cotton imports are forecast at a seven-year high, driven by the highest projected consumption in three years, robust State Reserve (SR) imports, and attractive prices for imported cotton relative to domestic supplies, the USDA said in its latest monthly report.

Imports are expected to support China’s record year-over-year rise in consumption and its 2020/21 consumption is expected to recover from the lowest level in 16 years to surpass the previous year by 7 million bales, accounting for half of the gain in global use, it added.

Currently, spinners’ spot margins are roughly 30 percent higher compared with the previous year due to robust demand for cotton yarn and significantly lower yarn stocks, the report pointed out, adding that the highest SR imports in seven years are also supporting strong China demand.

Favourable import prices have also played a role. China’s widely used domestic price index (CC3128B) was 12 cents higher than a “landed” AIndex price (1 percent inquota duty plus 9 percent VAT) in May 2021.

This is more than 10 cents higher compared with the same period last year, the report said, adding that the stronger relative prices for China’s domestic supplies have been driven by stronger agricultural prices in China (e.g., corn and wheat), quality issues with China’s 2020/21 crop, and a weaker U.S. dollar.

China’s 2021/22 imports are forecast down from the previous year as SR demand is projected to fall from the robust levels witnessed thus far in 2020/21. Nonetheless, 2021/22 imports are forecast at the second-highest level in eight years, helping to support larger consumption that is projected to be equivalent to one-third of global use, the repot said.

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