Recently, the National Development and Reform Commission announced that the first batch of sliding tax quotas for 2022 will be issued in the near future, with a quantity of 400,000 tons, all of which are non-state-owned trade and are limited to imports through Canadian trade. Although there is only a 400,000-ton sliding tax quota, it helps export-oriented cotton textile companies reduce costs, improve product competitiveness, and weakens the negative impact of the Xinjiang cotton ban.
Supported by China’s additional issuance of sliding tax quotas in 2022, commodity futures such as energy and agricultural products returning to an upward trend, US cotton contracted exports in 2021/22 continue to be strong, US cotton planting area growth is expected to decline, etc., ICE on March 11 The May cotton futures contract rose sharply, exceeding 121 cents, and market confidence quickly recovered.
The author believes that after the quota is issued, textile enterprises can have the following centralized choices when purchasing foreign cotton:
One is port bonded cotton. According to statistics and estimates from some foreign businessmen and import companies, the total cotton inventory in China’s main ports so far is about 320,000-340,000 tons (bonded + non-bonded), but the spinnability of Indian cotton in 2019/20 and 2020/21 is slightly poorer. The proportion may reach about 40%, and bonded US cotton and Australian cotton are relatively scarce, so it is expected that some Brazilian cotton in the warehouse will be popular.
The second is to sign contracts for foreign cotton with shipping dates of March/April/May/June. Although the contracted export volume of U.S. cotton in 2021/22 is close to the USDA forecast target, there is not much room left to play or oversell. However, the supply of goods is concentrated in the hands of large international cotton merchants and exporters, so there are immediate options for exports. Cotton includes American cotton, Brazilian cotton, Indian cotton, West African cotton, etc., and the choice space is relatively large.
The third is to sign a contract for Brazilian cotton with shipping dates in September/December. Since the sliding scale tariff quota is valid until the end of 2022, it is not suitable to sign contracts to purchase US cotton in 2022/23. September and December are both “green and yellow” periods for Indian cotton and African cotton exports, and Brazilian cotton in 2021/22 Become the best choice.
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