Apparel / Textiles & Accessories

According to Huacheng Import and Export Data Observation, the Australian Bureau of Agricultural Resources, Economics and Sciences (ABARES) has released a report showing that the expected cotton planting area in Australia for 2022/23 is 684000 hectares, with the planting area in irrigated cotton areas decreasing due to excessive rainfall and the dry land area increasing. However, due to the lower yield per unit area of dryland cotton fields compared to irrigated cotton fields, the total production is expected to be around 1.15 million tons, a year-on-year decrease of about 6%, still at a relatively high level, higher than the previous estimate of 5 million packages (approximately 1.135 million tons) by the Australian Cotton Association, but lower than the 6 million packages expected by the US Agricultural Counselor. Huacheng Import and Export Data Observation Report.

The latest monthly report from the US Department of Agriculture shows that Australia's cotton production for 2022/23 was 1.197 million tons (a one-time increase of 108000 tons compared to the February report), which is lower than the US Agricultural Counselor but significantly higher than the predictions of relevant Australian institutions.

According to Huacheng Import and Export Data Observation, although the proportion of China's monthly cotton imports from Australia to the total cotton imports for that month has gradually increased from 1% to 4% since 2022/23 (February 2023), due to a year-on-year decrease of 45.5% in China's cotton imports from January to February, although the proportion of Australian cotton imports has increased, the quantity has decreased. Some institutions, cotton traders, and cotton textile enterprises have judged that although the total cotton production in Australia for 2022/23 is still very promising, the following factors will make it difficult for Australian cotton to make significant progress in exporting to the Chinese market. There is still a long way to go to restore the scenery of previous years, as reported by Huacheng Import and Export Data Observation.

One is that demand growth is not smooth. Due to the slow global economic recovery, high inflationary pressure, and the negative impact of the Federal Reserve's continued interest rate hikes, coupled with the fact that textile and clothing buyers in Europe, America, and other countries are still destocking and under pressure from the Xinjiang cotton import ban, high expenditure, high added value, and high profit export orders are relatively scarce. Chinese enterprises are constrained in their demand for high-quality and high index Australian cotton;

Secondly, the quotation for Australian cotton is relatively high, resulting in a decrease in cost-effectiveness compared to the previous period. From the quotations of international cotton merchants and trading companies, the basis of Australian cotton SM 1-5/32 (strong 29GPT) for the June/July/September shipment is stable at 15.5-16 cents/pound (2305+basis), while the basis of American cotton EM M 1-5/32 for the same shipment is 14.75-15 cents/pound; Due to the small number of traceability orders and the majority of short and loose orders, American cotton/Brazilian cotton has a strong substitutability for high index Australian cotton;

Thirdly, since the beginning of this year, there have been clear signs of a rebound in China Australia relations, with frequent high-level exchanges and a gradual return to normal economic and trade exchanges. However, with Australian Prime Minister Albanese approving the ban on TikTok and maintaining consistency with other member states of the "Five Eyes Alliance", the so-called "high emphasis on developing economic and trade relations with China and equal treatment of enterprises from various countries, including China" by the Australian side may lack integrity, Therefore, Australia is determined to follow the footsteps of countries such as the United States and Britain to curb China, and it is difficult for China Australia relations to truly recover. Huacheng Import and Export Data Observation Report.