Imported cotton detained largely outside China Customs

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Influenced by limited quota and downturn of domestic textile industry, a large number of imported cotton are backlogged in port warehouses.

It was reported that in over 30 logistic warehouses, mountains of cotton backlogged for long, which caused billions of loss in yuan for several agencies. According to a principal of Qingdao Hongchuan Logistics Ltd, they stopped receiving orders one month ago as their warehouses of over 20000 m2 are filled up with cotton.

Data from the Customs reveals that the amount of imported cotton is climbing year by year, refreshing records continuously. In the first half of 2012, China imported 3.055 million ton cotton with a year-on-year growth of 130.2%; while in this July only, 405830 ton cotton was imported, twice more than the amount of 157066 ton in last July.

“We prefer imported cotton as it is much cheaper”, said a principal of a cotton textile listed company.

Data shows that the price spread between imported and local cotton is high to about 5000 yuan per ton. As a result, textile enterprises having quotas all choose to purchase imported cotton, while for those without quota, they prefer to buy quotas instead of local cotton.

Great demand has led to the soar of imported cotton. However, due to the quota limits and downturn of domestic textile industry, imported cotton is difficult to come into Chinese domestic market smoothly.

Currently, most cotton imported companies are expecting more quotas from government. However, considering the flooding in cotton would have serious negative impact on local cotton market, “Chinese government is not likely to relax the quotas”, said WANG Qianjin, Chief Editor of www.webtextiles.com, “as National Development and Reform Commission (NDRC) has recently released another 400 thousand ton quotas for processing trade that only companies with foreign orders can apply for. Since these cotton products will be finally exported overseas, domestic cotton price won’t be affected.”

According to governmental documents, China provides every year at least 0.894 million ton within-tariff quotas for imported cotton with 1% tariff and 1 to 2 million ton extra quotas with 5% to 40% tariff. Till now in 2012, China has provides 2.5 million ton cotton quota using out all these prescribed quotas. Consequently, the accumulated imported cotton cannot pass the Customs.

At the moment, there are more than 100 cotton distributors in bonded zones in wait-and-see mode. If no more quotas from Chinese government, they still can wait to sell their cotton to Northeast Asia and India in September. As these countries export now all their cotton to China, supply-demand gap will soon appears. “In this case, foreign imported cotton enterprises detained outside China Customs won’t be likely to suffer a loss”, said WANG.

It was reported that NDRC would probably release about 1 million tons national cotton reserves in September, the details of which are still under discussion.

Source: http://www.morningwhistle.com/html/2012/Company_Industry_0827/213698.html

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