China Cotton Auction: 99 Percent of Cotton Offered Is Being Taken

China Cotton Auction: 99 Percent of Cotton Offered Is Being Taken

Mumbai (Commoditiescontrol): 11 May 2016

China commenced the auction of its cotton reserves which had been announced in April by the China National Development and Reform Commission (NDRC). It was stated that nearly 9 million 480 pound bales or 2 million metric tons of cotton would auction from the reserve which is expected to be around 58 million bales or approximately 12.88 million metric tons.

Last year when NDRC did try to sell cotton from its reserve it did not find many takers on account of price at $1.30 per pound being 50 cents higher than the market.

Auction Quantity

Auction commenced on 3rd May. Cotton being auctioned is that of the year 2012-13.



Quantity in Metric Tons

Quantity in Metric Tons	Total Quantity Offered	Total Quantity Sold	Total Domestic Cotton Sold	Total Imported Cotton Sold
	181515	180092.1	51133.68	128958.4

180092 tons of cotton or 99.22 percent of total quantity offered was sold in the auction. Of which Domestic cotton accounted for 51133.68 tons or 28.17 percent of total quantity offered. The remaining 71.83 percent or 128958.4 tons comprised of imported cotton. Quantity of domestic cotton offered increased as the days progressed while that of imported cotton reduced. However total quantity of imported cotton sold outnumbered that of domestic cotton.

Average quantity being offered on a daily basis has been 30015 tonnes. Average length of the cotton on offer was 27.78 MM.

Auction Price

Prices this time were more competitive.



As can be seen above prices were more market driven rather than a fixed price last time. Prices infact fell as the auction proceeded from 3rd May to 10th May.

Exchange Prices With Volumes



ICE Cotton July



ZCE Cotton 3rd Month (September)

Effect of the auction has been clear with both Chinese and International prices plunging. Falling prices is seeing volumes on ICE increase while that on ZCE decreased.

Today’s (11th May) Auction Offer

China State Reserves has offered 28092.394 tons for sale today.

First Session will comprise of 14349.60 tons of which 8351.55 tons will be domestic cotton and 5998.05 tons will be imported cotton.

Second session will comprise of 13742.75 tons of which 3294.56 tons will be domestic cotton and 10448.22 tons will be imported cotton.

Floor price set for today’s auction is even lower than that of 10th May at 11,931 yuan per ton or $0.89 per pound.

Impact

As can be clearly seen by the price action on ICE and ZCE prices of cotton is falling. With NDRC lowering floor price of today’s auction to $0.89 per pound it is clear that it wants to go the extra mile to ensure sales of all cotton it has offered and thus prices of cotton will continue to remain under pressure.

(By Commoditiescontrol Bureau: +91-22-40015522)