Aug. 11 (Bloomberg) -- China, the world??s largest cotton consumer, may raise import quotas as sales from state stockpiles have failed to relieve a shortage of supplies, analysts said.
??It??s likely that the government will increase sales from its reserve while issuing additional quotas for imports,?? Dong Shuzhi, analyst at Jinshi Futures Co., said by phone from Shanghai. The country is likely to issue a further 500,000 metric tons in quotas to be used by end of this year, he added.
Increased imports by China may boost world prices, which have jumped 30 percent this year on speculation demand will recover as global production declines. Exports of textiles by China, the world??s biggest, have begun to rebound, draining depleted cotton inventories.
??China is likely to issue some cotton import quotas to replenish both state and commercial stockpiles,?? said Ma Wenfeng, analyst at Beijing Orient Agribusiness Consultant Ltd. ??The government has almost completed its planned auctions and the whole industry is sitting on very low commercial inventories.??
China issued 894,000 tons of import quotas at the beginning of this year at a 1 percent import duty, Jinshi??s Dong said. The government issued a further 400,000 tons in June to export- processing companies under a sliding duty system, he said.
Imports Plunge
China??s cotton imports slumped 41 percent in the first six months to 735,000 tons, said the National Development and Reform Commission, the top-economic planning agency. The country imported 1.2 million tons of cotton in the 10 months through June, also down 41 percent from a year earlier, the NDRC said.
??The Chinese cotton market has been tight since the government bought over 2.7 million tons of crop for stockpiles last year,?? Dong said. The state has since sold 1.16 million tons in auctions, about 76 percent of the volume allotted for sale, Dong said. China earmarked 1.52 million tons for sale into the domestic market from May to ease short supplies.
Still, that hasn??t been enough to alleviate the shortage, and the remaining import quota for the second half isn??t likely to be enough to meet demand, Dong said.
??According to our surveys, the textile industry nation- wide has probably 100,000 to 200,000 tons of cotton inventories, which is quite low given that China consumes about 1 million tons each month,?? Beijing Orient??s Ma said.
December-delivery cotton ended up 2.1 percent at 63.75 cents a pound in New York yesterday.
Exports Rise
China??s textile and garment industry exported $14 billion worth of goods in June, up 13 percent from the previous month, although down 10 percent from a year ago, the NDRC said. China??s yarn production gained 9.4 percent in June to 2.2 million tons, it added.
The government could increase sales from its state stockpiles by 300,000 tons to 600,000 tons in addition to the 1.52 million tons instead of allowing more imports, Tang Xiaolu, manager at cncotton.com.cn, said by phone from Beijing.
??It??s more likely the government will sell more from its stockpiles,?? Tang said. The NDRC said in its June report that the state could increase stockpile sales to relieve supply concern, she added.
Still, there??s little scope for the government to increase sales volume from its stockpiles, Ma at Beijing Orient said. ??It had 2.5 million tons in inventories by the end of July,?? he said. ??The government usually ensures at least 2 million tons at any time so there??s not much it could sell.??
New-crop cotton this year will become available in late August, although the bulk of sales only start in mid-September, Ma said.
Output may fall to 7.5 million tons this year from an estimated 7.8 million tons in 2008, as farmers in provinces such as Hubei and Anhui reduced acreage to plant grains, Ma said.
Any additions to import quotas will be given to companies that process imported cotton for textile exports, Ma said. ??Perhaps the state reserve will buy some to replenish its stockpiles and product mix,?? he added.
--Feiwen Rong. Editors: Richard Dobson, Wendy Pugh
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