Web Sify
Follow us on
Mail
Print

Southeast Asia nudges aside China as India's top raw cotton buyer

Source : REUTERS
Last Updated: Fri, Jan 25, 2013 11:50 hrs

* China's yarn appetite boosts southeast Asian raw cotton demand

* Rising southeast Asian mill demand to benefit Indian raw cotton

* Low freight cost gives Indian cotton an edge over U.S. fibre

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 Asian countries.

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. (1 bale=170kg) (Additional Reporting by Ruma Paul in DHAKA; Editing by Clarence Fernandez)




blog comments powered by Disqus
most popular on facebook
talking point on sify news