China to buy Xinjiang cotton, but state stockpiling won’t save mills from massive losses amid US ban

To help stabilise China’s reeling cotton industry, the state will buy up to a half-million tonnes of Xinjiang cotton from mills starting on Wednesday

But Xinjiang’s cotton-ginning mills are still likely to lose a fortune, having paid much more for raw cotton last autumn, and upstream pressure is only expected to continue

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A worker gathers cotton yarn at a textile manufacturing plant in China’s Xinjiang Uygur autonomous region. Photo: AP

Published: 11:00pm, 12 Jul 2022Updated: 12:01am, 13 Jul 2022

To help stabilise China’s cotton market just weeks after a crippling US ban on Xinjiang products went into effect, Beijing intends buy up to half a million tonnes of Xinjiang cotton for its state reserves – ending a 15-month drought of such purchases.

The first of what looks to be multiple rounds of purchases is set to begin on Wednesday, and it comes as Beijing seeks to support China’s cotton industry, which has been increasingly shunned by downstream manufacturers who are wary of running afoul of a sweeping United States ban on products from the Xinjiang Uygur autonomous region.

The total purchase will entail between 300,000 and 500,000 tonnes of Xinjiang cotton, which will come from mills in the region, according to a statement by the China National Cotton Reserves Corporation (CNCRC) on Friday.

The buying will take place as long as the spot price of domestic cotton stays below 18,600 yuan (US$2,770) a tonne, the CNCRC said. The spot price on Tuesday was 17,559 yuan, or more than 20 per cent less than the price in January, according to the China National Cotton Exchange.

The state stockpiler last replenished its reserves of Xinjiang cotton between December 2020 and March 2021. However, market sentiment has remained dampened since Friday’s announcement.

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