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Insight | Time:Dec 29 2017 11:19AM
How will cotton linter import perform after rebounding?
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Cotton linter import of China in Nov rebounded significantly to 8,092.18 tons, up 355.57% m-o-m, hitting new highs in the second half of 2017. Main reasons are as follows:

1. The import volume during Jul-Oct, 2017 had been lower than the same period of past few years, especially hitting new lows of 1,776 tons in Oct, which was the minimum since Mar, 2009. Therefore, the great bound in Nov was just the recovery to normal level.

2. Cotton linter market has warmed up somehow since mid-Oct as import demand has been spurred by rising volume and price. Moreover, increasing supply is available after new arrival of linters in overseas market and there is demand for restocking from cotton linter pulp mills and refined cotton plants.

3. Constant decline of import price boosts import volume. Cotton linter import price averages at $460.45/mt in Nov, down 7.34% m-o-m and down 16.25% y-o-y, which has been consecutively slipping since May with cumulative decrease of 30%. The y-o-y change has been slumping for consecutive three months since Sep. Based on exchange rate of RMB against USD at 6.65, the import price is equal to 3,535yuan/mt in Nov with preliminary advantage.

As to import origin, Indian linter takes up about 81% of total share in Nov and the unit price is much lower than Chinese average level at around $405.6/mt, 3,100yuan/mt on the RMB basis. Given obvious import advantage recently, the products are favored by Chinese staple-grade cotton linter pulp mills and industry-grade refined cotton companies.

Although cotton linter import of China recovers to be normal in Nov and there is room for further growth, the volume throughout the year will definitely decline, which is estimated around 105kt in 2017, hitting new lows in the recent decade (except for the quantity in 2008 when the import was affected by financial crisis), down more than 50% on yearly basis.

The sharp reduction of cotton linter import is mainly attributed to shrinking demand resulting from nationwide environmental protection inspection and unbalanced supply-demand relationship caused by increasing supply. Cotton linter output of China in 2017 is expected to be higher than that of 2016 at 680kt. Coupled with import, artificial linter production as well as beginning stocks, there is obvious supply glut on the market.
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