* China's yarn appetite boosts southeast Asian raw cotton
* Rising southeast Asian mill demand to benefit Indian raw
* Low freight cost gives Indian cotton an edge over U.S.
By Deepak Sharma
MUMBAI, Jan 25 (Reuters) - India's sales of raw cotton to
southeast Asia are expected to more than double in 2013,
toppling China from its position as the top customer of the
world's second biggest producer of the fibre, traders and
industry officials said on Friday.
To evade an import duty on raw cotton, textile mills in
China prefer to buy yarn processed cheaply in Southeast Asian
countries such as Indonesia and Vietnam, thus boosting the
appetite for raw fibre in those countries.
"Higher cotton yarn imports by China boosted fibre
consumption in Southeast Asian countries, which in turn stepped
up raw cotton purchases from India," said A. Ramani, secretary
of the Indian Cotton Federation (ICF), a traders' body.
Southeast Asian countries as a whole have imported more than
1.6 million bales of raw cotton from India in the marketing year
that began last Oct. 1, or more than 2.6 times the figure of
600,000 bales in the corresponding period last year.
This year's higher purchases have partly compensated for
lower demand from China, which is sitting on huge stocks, and is
trying to promote domestic cotton use by imposing a punitive 40
percent duty on imports.
To stay competitive, mills in China, the world's largest
textile maker, have turned to the countries of south Asia, as
well as Indonesia and Vietnam, whose cotton yarn is cheaper,
thanks to low labour costs and geographical proximity.
Imports of cotton yarn are free of Beijing's tough quota
limits and cost less, traders said.
Cotton yarn imported from Southeast Asia is at least $100 a
tonne cheaper than that produced at home, said an official with
a Shanghai-based trading firm, who asked not to be identified as
he was not authorised to speak to the media.
"Higher cotton yarn imports by China could be an opportunity
for Bangladesh, where labour is cheap," said Monsoor Ahmed,
secretary of the Bangladesh Textile Mills Association, which
groups 1,364 mills in the world's second-largest importer of
cotton after China.
LOWER FREIGHT COSTS CONTRIBUTE
Indian traders said freight costs lower than those of U.S.
imports have helped boost Indian exports to Southeast Asia,
which is gearing to satisfy China's growing appetite for yarn.
Indian traders are exporting raw cotton to Southeast Asian
countries at around 85 cents per lb (FOB) compared to 97 to 99
cents per lb for U.S. cotton.
Buyers in Bangladesh, Vietnam and Indonesia have to pay
transport costs of just 2 or 3 cents per lb for Indian imports,
against 7 to 8 cents per lb for U.S. cotton, said Arunbhai
Dalal, a trader in Ahmedabad, India's western textiles hub.
Indian traders have already shipped around 2.4 million bales
of raw cotton in the current marketing year, mostly to Southeast
This is less than last year's corresponding figure of 3.5
million bales, but the bulk of those shipments went to China.
"If the trend continues, Southeast Asia could replace China
as the favourite destination for Indian cotton," Ramani said.
An expected revival in cotton exports has prompted India to
revise its projection for fibre exports to 8 million bales in
the current marketing year from 7 million. That is still 38
percent lower than a record 13 million bales in the previous
year, when China brought huge volumes of cotton.
Exports to China in the current marketing year have dropped
around 70 percent following reduced purchases by China,
traditionally the biggest buyer of Indian cotton.
Traders hoped that higher imports of cotton yarn by China
from other Asian destinations, sourced from Indian raw
varieties, would boost India's overall cotton exports.
(Additional Reporting by Ruma Paul in DHAKA; Editing by