MUMBAI (Commoditiescontrol) - As the state reserve cotton stock auctions by China came to an end Monday, it is reported that the country sold only 63,412 tons of cotton, just 3.4 percent of the total offered.
Officials had earlier said that they were estimating to offload as much as 1 million tons through state reserve auctions from the massive stockpile of around 11 million tons. On the other hand, industry had expected that around 300,000 tons of cotton could be sold out to domestic mills.
Benchmark prices in the auctions ranged from 13,200 yuan ($2,126) to 15,500 yuan per tonne, compared to prices for the most active contract on the Zhengzhou exchange now around 12,465 yuan.
Domestic mills showed less interest in buying the reserve cotton allegedly due to high pricing and a slowing economy. Last month, the country’s apex bank, the People’s Bank of India, has devalued the Yuan by around 4 percent to heal the country’s exports sector, but put pressure on other currencies at the same time.
Secondly, mills have sufficient inventory to meet their immediate requirement. They are ready to buy cotton at certain intervals on a hand-to-mouth basis.
Domestic cotton from 2011 season attracted most of the buying during the two months auction. Mills have purchased nearly 52,695 tons of cotton of 2011 domestic cotton from the total 63,412 tons.
With this, it is evident that Chinese government will have to think as to how it will reduce its stockpile. This also raises concern that buying from the top consumer of the Indian cotton may not revive in the long-term.
(By Commoditiescontrol Bureau; +91-22-40015532)
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