Customs Statistics: Cotton Imports Fell Sharply Month On Month For Three Consecutive Months

According to customs statistics, China's cotton imports in June 2024 will be about 160000 tons, a month on month decrease of 100000 tons, or 38.5%; There was a year-on-year increase of 76200 tons, or 86.0%. After cotton imports fell 13.88% and 23.90% month on month respectively in April and May, cotton imports fell sharply again in June.

Most domestic cotton textile enterprises and traders' enthusiasm for inquiry/purchase of bonded cotton/spot cotton did not continue to recover with the low "clocking" of 70 cents/pound (a new low since mid December 2020) of the main contract of ICE cotton futures in mid June. According to the judgment of some cotton related enterprises, as of June, China's cumulative cotton imports in 2023/24 were close to 2.9 million tons, with a year-on-year growth of more than 155%. However, considering the continuous decline of cotton imports on a month on month basis, it is expected that the hope of the total cotton imports breaking through 3.2 million tons this year will be weakened.

Why did China's cotton imports fall by nearly 40% month on month in June? The industry analysis is mainly related to the following factors:

First, import quotas have become "roadblocks". Up to now, there is still no clear information about the increase of cotton import quota with sliding tariff; However, after the import quota of cotton within 1% tariff is largely consumed, there is a shortage of supply. In addition, enterprises above the designated size need to reserve 1% quota to import Australian cotton and Brazilian cotton during the shipping period from July to December. Therefore, although the port bonded cotton inventory is still sufficient, and the domestic and foreign cotton hanging range is more than 1000 yuan/ton, it is still difficult for foreign cotton to enter the domestic market smoothly.

Second, due to the expansion of the Red Sea transportation crisis, the sharp rise in freight charges from China to North America and the shortage of containers and other factors in April May, the shipment of American cotton to China in 2023/24 was less than expected, which led to the delay in the implementation of some contracts.

Third, although export traceability orders have still dominated since May 2024, the increase is lower than expected (the sales of domestic cotton blended with American cotton, Australian cotton, Brazilian cotton, etc. also slowed down significantly); In addition, some cotton mills have limited production and reduced production, and downstream consumers are more and more cautious about purchasing imported cotton.

Fourth, the devaluation of the RMB since June has led to an increase in cotton import costs. Since June, the overall exchange rate of RMB against the US dollar has shown a wide range of fluctuations, including depreciation for seven consecutive trading days since June 19, and a cumulative depreciation of 2505 basis points in the first half of 2023. Such a sharp and rapid depreciation has led to a high wait-and-see mood among cotton related enterprises.