Apr 6, 2018
Tariffs on U.S. may help India treble cotton exports to China
Apr 6, 2018
India, the world’s second-biggest cotton exporter, is hoping to treble shipments of the fibre to China next year as Beijing seeks to replenish stockpiles and imposes a 25 percent import tax on cargoes from the United States.
Despite India’s efforts to grab a bigger piece of the Chinese market, cotton from the United States, the world’s biggest exporter, has held sway for the past few years. But China’s announcement on Wednesday that it will impose tariffs on 106 U.S. commodities, including cotton, could now tilt the balance in India’s favour.
“China’s move to impose duty on U.S. cotton shipments will help us,” Atul Ganatra, president of the Cotton Association of India, told Reuters.
India is looking to sell 2.5 million to 3 million bales, each of 170 kg, to China in the next season beginning in October, up from around 800,000 bales of expected exports in the 2017/18 marketing year, Ganatra said.
China’s decision to slap the 25 percent import tax on cotton supplies from the United States comes as Beijing’s own stockpile is depleting fast. Its total imports are expected to rise 38 percent to 8-9 million bales in 2018/19 as it needs to shore up depleting domestic reserves.
“India has always managed to grab at least 25 percent of China’s total cotton imports,” Ganatra said.
It was too early to know the exact impact of China’s tariff on U.S. cotton, but India’s exports could reach up to 3 million bales, he said.
During the current 2017/18 year, China is scheduled to import 2.5 million bales of cotton from the United States. Other suppliers include Brazil and Australia.
China produces about 32 million bales of cotton and its textile mills consume around 45 million bales, allowing imports to meet the shortfall.
“After large-scale imports, China was sitting on a stockpile of about 60 million bales four years ago, which is now likely to come down to 10-15 million bales by the end of this year, giving India a chance to raise its exports,” Ganatra said.
India benefits from geographical proximity to China compared to other competitors.
As well as lower freight rates, shipments from India reach China in about two weeks compared to an average of three to six weeks from other suppliers, said Chirag Patel, chief executive of Jaydeep Cotton Fibres Pvt Ltd, a leading exporter.
“There is little room for Chinese production to go up and significant amounts of stocks from Chinese stockpiles are of poor quality. It has no option but to ramp up imports,” said a Singapore-based dealer with a global trading firm. The dealer was not authorised to talk to media.
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