Australian Cotton Clears Chinese Customs on Bets Sanctions Will End
Chinese consumers are purchasing Australian cotton in anticipation that the unofficial ban that severely reduced Australian cotton exports to China may be lifted amid thawing diplomatic relations that have already allowed trade in other commodities subject to sanctions to resume.
According to CNCGC Australia merchant Tom Zheng, Australian cotton is being shipped to a bonded warehouse in Qingdao and possibly to another location by the Australian division of China National Cotton Group Corporation, one of the largest state-owned Chinese cotton buyers.
The cotton can be sold into the lucrative Chinese domestic market, he said, if the unofficial ban is lifted. If not, businesses in duty-free zones may use the product for re-export.
“It’s not a complete gamble because there is consumption in China in duty free zones,” Zheng said. “The ban will likely be lifted as the relationship strengthens.”
Australian cotton has been entering China for months, according to a trader who spoke on the condition of anonymity, and small shipments have already been cleared by customs.
The A$900 million ($620.28 million) trade came to an end in late 2020 after China implemented a number of official and unofficial restrictions that also affected commodities like coal and timber. China was once Australia’s biggest cotton market.
Chinese customs data show that China imported 20,000 tonnes of Australian cotton in 2022 as opposed to 400,000 tonnes in 2019.
Nevertheless, trade restrictions on coal have already been partially lifted as a result of the diplomatic thaw that followed a meeting between President Xi Jinping and Prime Minister Anthony Albanese in November.
Adam Kay, the CEO of Cotton Australia, reported hearing rumors that Chinese traders were entering cotton forward contracts for May. They would move supplies somewhere else if trade was still prohibited, he continued.
“We’ve still got contact with spinning mill contacts in China and they’d love to have access to our high quality cotton again,” he said.
Reference: Reuters
