| BEIJING/NEW YORK
BEIJING/NEW YORK Jan 4 China, the world's
biggest cotton consumer and importer, is studying a proposal to
issue extra import quotas for textile mills which have been
pushing the government to boost the amount of cheaper overseas
cotton they can buy, industry sources said.
If approved, the quotas will require mills to buy three
tonnes of cotton from state reserves for every tonne they
import, said the sources who declined to be named as they were
not authorised to talk to the media.
It is not clear if these imports quotas would be a duty free
basis or on a sliding tariff system.
Any increase in imports from China could boost U.S. cotton
prices, as the United States is the largest exporter of the
fibre to China. Foreign cotton supplies can cost as much as 40
percent less than local cotton, whose price is boosted by the
government's stockpiling policy.
"We don't expect the import quotas to be very big volumes.
It is compromise by the government to help quieten down
complaints by textile mills," said Jian Jinglei, an analyst with
Shanghai CIFCO Futures.
"The government does not need to issue extra import quotas
as its stocks are equivalent to about one-year consumption."
China issued import quotas for more than 3.7 million tonnes
in 2012 at sliding tariffs of 5-40 percent.
State cotton reserves are expected to rise to a record 8.6
million tonnes by the end of the 2012/2013 cotton stockpiling
program in March.
In a bid to ease prices and increase supplies, the top
planning agency, the National Development and Reform Commission
(NDRC), said in a statement dated Dec. 28 that it would sell an
unspecified amount of cotton from its reserve. It gave no
China began its cotton stockpiling programme in 2011 to
support local farmers. The government buys cotton at a premium
to market prices, a policy which has sucked supplies out of the
domestic market and forced textile mills to rely on imports.
Only a limited number of mills, however, are allocated
import quotas, which means the majority have to pay expensive
domestic prices, making them uncompetitive.
Companies that can import cotton also often sell their
purchases to other mills at a huge profit, adding to the cost
burden for textile mills.
China's cotton imports in the first 11 months of the year
2012 jumped 79 percent compared to the previous year to a record
4.6 million tonnes.
($1 = 6.2303 yuan)
(Editing by Miral Fahmy)