China, the world's top importer and consumer of cotton, has released another 500,000 tonnes of cotton from state reserves to help ease tight supply for textile mills amid delays to the domestic harvest. The additional release, on top of 2.12 million tonnes already sold over past months, means Beijing is unwilling to issue more import quotas to meet tight domestic supply amid a delay to the domestic harvest.
China National Cotton Reserves Corp would release 139,000 tonnes from 2008's harvest and 360,000 tonnes from the 2006/2007 harvest from Friday, according to a notice posted on an industry website (www.cncotton.com). But only 16,000 tonnes was offered on the first day, which dealers said would not satisfy demand and would keep Zhengzhou futures prices in a bullish trend. The domestic price of cotton was 1,000 yuan ($146.5) per tonne higher than US cotton.
"The sale of 500,000 tonnes was far from enough to meet demand," said Zhang Xiangjun, an analyst with Beijing CIFCO Futures. "Given that only a small amount will be sold every day, the sale could last until the end of December and any release of import quotas could come late in the year or next year."
The most-traded contract, May 2010 contract, traded up 210 yuan per tonne to 15,620 yuan by 0257. China's cotton output this year could fall by more than 10 percent to about 7 million tonnes. Heavy snow over the past week in China's cotton-growing areas in the north has also reduced supplies from farmers.
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