China

China Buys Australian Cotton in Anticipation of Trade Ban Lift

Bales of cotton sit in a paddock in Macquarie Valley Irrigation Area near Trangie in New South Wales, in eastern Australia. Reuters file photo.

Australian cotton is being bought up by Chinese buyers in anticipation of an unofficial ban on exports being lifted after trade was resumed between the nations on some other commodities.

If the ban is lifted Chinese buyers will be able to sell the product in lucrative domestic markets. Companies can use the product for re-export if the ban is not lifted.

Australian cotton is being shipped to a bonded warehouse in Qingdao and possibly one other location, by the Australian subsidiary of China National Cotton Group Corporation, one of the biggest state-owned Chinese cotton buyers, CNCGC Australia merchant Tom Zheng said.

“It’s not a complete gamble because there is consumption in China in duty-free zones,” Zheng said. “We expect the relationship to improve and the ban will be lifted.”

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A trader who spoke on condition of anonymity said Australian cotton had been moving into China for months and small shipments had already cleared customs.

Once the biggest market for Australian cotton, the A$900 million ($620.28 million) trade ground to a halt in late 2020 after China imposed a series of official and unofficial restrictions – called a shadow trade war – that also hit commodities like coal and timber, lobsters, wine and barley.

Diplomatic thaw

China imported 20,000 tonnes of Australian cotton in 2022, compared to 400,000 in 2019, according to Chinese customs data.

But the diplomatic thaw following a meet between President Xi Jinping and new Prime Minister Anthony Albanese last November has already seen trade restrictions on coal partly lifted.

Cotton Australia chief executive Adam Kay said he had heard Chinese merchants were entering May forward contracts for cotton. In the event that trade remained blocked, they would move supplies elsewhere, he added.

“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.