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China turns to Australian and US cotton

China has resumed cotton buying, shipments of Australian cotton into China are on the rise again.

Just over 50 per cent of the 2018 Australian cotton crop shipped to date was bound for China. Including the consumption of Chinese owned mills operating in Vietnam this figure rises to closer to 70 per cent of the crop.

China is very important to the Australian cotton industry. China’s focus on depleting its strategic reserves of cotton dramatically reduced its imports of foreign cotton over the past few years. However, this may well be drawing to a close.

China is the second largest buyer of US cotton, making up 16 per cent of total recorded US sales to date. In addition to this China has purchased a further one million bales for shipment in the 2019/2020 crop year.

The spinning mills located in China free trade zones are exempt from paying import tariff on raw cotton. Total raw cotton consumption of these mills is estimated to be in the vicinity of two million bales a year. Shipments to these mills will account for some of the existing US sales of cotton to China.

Chinese free trade zones also contain an inordinate number of warehouses many of which are used to store foreign cotton.