April 27 (Bloomberg) -- China, the world’s largest cotton user, faces an imminent cotton shortage after India halted exports and demand climbed, the State-owned Assets Supervision and Administration Commission said today.
The deficit will be about 310,000 metric tons before the new crop comes onto the market, the agency said in a report, citing the China National Cotton Reserves Corp. The deficit calculation has taken into consideration the quantity China needs to import and the available global supply, it said.
India, the world’s second-largest cotton grower, halted exports last week to boost domestic supplies and cool prices. China’s economic growth of 11.9 percent in the first quarter is spurring textile consumption while cotton output last year shrank on reduced planting.
“We will have to turn to the U.S. cotton after India’s decision to halt exports, but that’s still not enough,” Yuan Renqing, analyst at Xinhu Futures Co., said by phone from Qingdao.
Chinese consumption may outstrip available supply by 3.5 million tons in the marketing year ending Aug. 31, and supply will remain tight next year, Mei Yong, an analyst at state- backed CNCotton.com said April 16. China’s cotton year runs from September to August.
Demand is recovering as China’s cotton yarn output jumped 20 percent in the first quarter as factories increased production on improving exports, the China Cotton Association said on April 23.
Prices Gain
Domestic cotton for spot delivery was quoted at 17,000 yuan ($2,490) a ton in Hubei yesterday, gaining about 300 yuan in the time since India’s announcement, Yuan said.
The government is likely to issue another 1.1 million tons of import quota in May, Yuan said, in addition to the existing 1.89 million tons.
“It’s difficult to be optimistic about domestic spring planting because farmers have had to delay by 7-to-10 days as temperatures in most major producing areas remained lower than usual,” the commission’s report today said.
Cotton prices will remain firm in the short term, the report added.
