Market Situation: Port Bonded Stock Slightly Increased Cotton Import Competitiveness To Be Improved

According to the feedback of cotton trade enterprises in Qingdao, Zhangjiagang, Wuhan and other places, although new Australian cotton has successively arrived in Hong Kong and entered the warehouse in 2023/24 since August, the port bonded inventory has begun to increase slightly. In recent days, the main force of ICE cotton futures contracts in December has broken 70 cents again, but domestic textile enterprises/cotton importers who hold cotton import quotas are concerned The focus of inquiry is still the Australian cotton in 2022/23. The shipment of Australian cotton in August October is not smooth; Compared with Australian cotton, as the main force of ICE fell below 70 cents/pound, bonded and ship American cotton/Brazilian cotton transactions were also active, and the basis for foreign cotton quotations remained mostly stable.

For the reasons why the "opening" of Australian cotton sales in 2023/24 is not smooth, the industry generally believes that: on the one hand, the basis difference of Australian cotton is relatively high, and export enterprises and international cotton merchants are mainly to complete early orders, and will not allow the interest to reduce the basis difference.

For example, from September 9 to 10, the basis difference of M1-5/32 (strong 29GPT) of Australia cotton from September to October at the main port of China is 14.25-15.5 cents/pound (benchmark ICE2412), while the basis difference of M1-5/32 of Brazil cotton on the same ship is only 6.5-8.5 cents/pound;

On the other hand, as the main cotton producing areas in Australia have experienced continuous rainfall in recent months (some areas are suffering from floods), the links of seed cotton harvesting, transportation, purchase and processing in 2023/24 will be affected The proportion of LM grade is high, and the fiber length is 1-1/16, 1-3/32, and so on. There are many hanging orders and quotations, which do not match the actual needs of cotton enterprises. Moreover, in 2024, China only issued 200000 tons of sliding tariff cotton import quota, and accelerated the listing of Brazilian cotton in 2023/24 with high cost performance ratio from September to December, which also restricted the transaction of Australian cotton in 2023/24.

From the perspective of quotation, the RMB quotation of M1-5/32 (Qiangli 28GPT) and SM1-5/32 (Qiangli 30-32GPT) Australian cotton in China's main port in 2022/23 is concentrated at 16685 yuan/ton and 16835-16935 yuan/ton (full price); On September 9-10, the net weight of bonded Australian cotton SM1-5/32 (Qiangli 29-31GPT) in Qingdao Port was quoted as 85.65-87.50 cents/pound (including Buy It Now price), and the import cost under 1% tariff and sliding standard tariff was 15025-15345 yuan/ton and 15330-15555 yuan/ton respectively.

Obviously, for most small and medium-sized textile enterprises without cotton import quotas, it is more cost-effective and cheaper to directly purchase Australian cotton in RMB that has been cleared.