Cotton prices rise or hurt Chinese textile mills next year

According to industry sources, the rise in cotton prices in the next year will inevitably hurt Chinese cotton mills, as the government continues to purchase cotton and the area sown to crops has shrunk.

Comprehensive media December 19 news, industry sources said on Monday that the next year, cotton prices rise and fear of injury and Chinese cotton mills, because the government continued to purchase cotton and the crop sown area was reduced.

They said that adjustments to the sliding tariffs on cotton imports may also increase the cost of textile mills that require high-quality crops.

The Ministry of Finance announced that starting from January 1, 2012, China will continue to impose a sliding tax on the import of a certain amount of cotton for customs duties and appropriate adjustments to the sliding tax tax formula.

Sliding tax is a method in which a tariff rate is set to a high to low and low to high setting of import tariffs. The higher the price of imported goods, the lower the import tariff rate and the lower the price of imported goods. The higher the import tariff rate. Its main characteristic is that it can maintain the relative stability of the prices in the domestic market for quasi-taxable goods, and minimize the impact of price fluctuations in the international market.

“We have no choice but to accept the increase in cotton prices,” Deputy Vice President of China’s main textile group said. “He added that his company is still consuming cotton when prices are high.

Since the beginning of this year, the price of cotton has been declining. In mid-February, the March cotton futures contract on the Zhengzhou Commodity Exchange has fallen by more than 40%.

There is not much high-quality cotton available for use by domestic textile mills because the government actively pursues cotton purchases to support domestic prices.

As of Friday, the government has purchased 1.62 million tons of cotton from farmers, and analysts predict that the total amount of storage will reach 2.5-3 million tons, accounting for 35-42% of the NDRC's 2011 total production forecast.

The 2011 cotton temporary storage and storage price was 19,800 yuan per ton for standard lint to warehouse prices. Some analysts speculated that the government’s sales profit will not be less than 2,000-3,000/tonne.** The price also shows that China The trend of cotton prices this year, Zhengzhou cotton ** main contract in mid-February this year, a record high of 34,870 yuan per ton, after the impact of policy tightening all the way down.

Analysts at China Cotton Textile Information Network said, “If the government does not announce the import quotas for sliding quasi-tax as soon as possible, local cotton prices may increase, and the textile mills will compete for domestic crops (early next year).”

China's cotton quota for 2012 was 894,000 tons and the tax rate was 1%. This import quota amount has remained unchanged since 2004. In addition, the government approves a certain number of sliding quota import quotas each year, and the sliding tax rate is from 5% to 40%.

Last week, the Chinese government made adjustments to the sliding tax tax formula.

After the implementation of the new sliding tax policy, the cost of imports does not change when the New York future cotton price is below 50 cents or more than 100 cents per pound.

However, if the cotton price is between 50-100 cents, the import cost per ton will increase by 512 yuan***.

According to analysts from Guohai Securities, the government hopes to reduce the impact of low international cotton prices on domestic prices through new calculation methods.

Analysts said that the shrinking demand for textiles and the increase in production costs also weighed on cotton farmers' enthusiasm for production.