The auction of Chinese cotton reserves began on May 3, 2016. The results in the first week showed a very active participation of spinners with a purchase rate of 99.9 per cent. This purchase rate is much higher than the 3.4 per cent purchase rate for all of 2015. Out of the 1,21,165 metric tons offered, 1,20,350 metric tons were purchased by spinners. Of the total volume purchased, 27,671 metric tons were domestic cotton and 92,679 metric tons were imported cotton. The imported cotton offered in the auctions was fully purchased while the domestic crop was 97.2 per cent purchased.
US and Australian cotton were the most popular during the auctions and were also purchased at a higher price. So the high purchase rate indicates a shortage of cotton, specifically high-grade imported cotton, in the Chinese market.
The auction floor price offered this year appeared to be acceptable to buyers compared to last year. The high rate of purchase is likely to continue at least during the first weeks as Chinese mills are short of cotton. Spinning mills are the main buyers. However, some traders are also involved in auctions mainly to source imported cotton as some of them see a recovery in global cotton prices.