Game of thrones: the China-USA battle shakes the cotton market

China continues shaking the cotton market. After years shaking the price of this key raw material for the fashion industry, first swelling its national reserves and, later, releasing them, now it returns to destabilize it in the framework of the commercial battle that it maintains with the United States.

As the world’s largest consumer of cotton, any movement that China makes in the world trade in this raw material has an effect in its international trade, led by the United States. And the projections of the International Cotton Advisory Committee (Icac) indicate that the Asian giant will reassert itself in this position in the ongoing campaign.

The Icac forecasts place China’s cotton consumption for 2018-2019 at a total of 8,45 million tonnes. However, since the start of the new season, in July 2018, Chinese purchases of US cotton have dropped drastically after the Beijing government applied tariffs of 25% in the framework of the trade war with the Donald Trump's Administration.

Chinese cotton imports from the United States have plummeted a 55,5% between August 2018 and February 2019

In this context, between August 2018 and February 2019, Chinese imports of cotton from the United States have plummeted a 55,5%, according to Icac data. In this period, Chinese purchases from US producers rose up to 3,36 million tons last season, meanwhile in the current period it reached 1,49 million tonnes.

To compensate this decline, as Chinese imports from the United States have been declining, these of other producing countries have increased, especially from Australia and Brazil. For instance, Australia exported to China in the 2017-2018 campaign a total of 280.000 tonnes, while up to March 2019, shipments had amounted to 440.000 tonnes.

In the case of Brazil, between 2017 and 2018, exports stood at 82.000 tonnes, while until last March, sales had skyrocketed to 380.000 tons. Other countries that have increased their sales to China are India, Benin, Sudan, Cameroon, Burkina Faso, Mali and Greece, according to the Icac.

On the other hand, China has recently announced that it will auction 800.000 tons of its national reserve throughout 2019. This auction was activated last week and will last until the end of September in packages of 10.000 tons per day.