China sold 120,000 tonnes of it stockpile in one week ©123RF
China sold 120,000 tonnes of it stockpile in one week ©123RF

China extends sale of cotton stockpile to domestic businesses

9 August 2016

China is to continue its annual auction of cotton for an extra month because of high prices and complaints of shortages from mill owners.

The price of cotton has been steadily increasing internationally since April, according to commodities data firm Mintec. Its latest statistics show a price increase of 19% from June to July.

China initially planned to sell two million tonnes of cotton to domestic businesses over the course of this year's auction season, from May to August, selling no less that 30,000 tonnes a day. In a statement on Monday the government said it would extend the auction to 30 September.

The current rate of sale is an indication of a shortage of high quality cotton in China’s textile sector, said the US Department of Agriculture’s (USDA) Foreign Agricultural Service.

According to USDA statistics, the Chinese government sold more than 120,000 tonnes of cotton in the first week of the auction almost double the total volume sold during the whole of 2015.

This price increase has been mirrored in China, according to the Zhengzhou Commodity Exchange. Three-month contract-futures in the country have increased from around ¥12,000 a tonne in March – the lowest since 2004 – to more than ¥16,000 in July according to the Wall Street Journal (WSJ).

“Because of the amount being sold and the slow speed of delivery, there is not enough [cotton] to meet demand, and overall the cotton market is tight,” the China Cotton Association told WSJ.

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