China will start selling cotton stockpiles next week to increase local supply, industry website cncotton.com said today.
The country will sell reserves in auctions to be held as early as next week at a minimum of 18,500 yuan ($2,913) a metric ton, the website said, without citing anyone or giving the amount the government intends to unload.
China’s textile industry, the world’s largest user of the fiber, has been hurt by weak demand as economic growth slowed to the lowest in more than three years in the second quarter, Zhang Zhenguo, founder of Shanghai Goldencot Global Trading Co., said from Shanghai today. The industry faces high raw-material costs because China’s cotton is traded at a steep premium to the overseas market, he said.
“China’s cotton prices may stabilize as long as there’s no bad news on the macro-side of the economy,” Zhang said.
Cotton for January delivery traded on the Zhengzhou Commodity Exchange gained 0.4 percent to close at 19,540 yuan a ton and have climbed 2.8 percent this month. Cotton in New York climbed 0.5 percent to 77.05 cents per pound at 3:54 p.m. in Beijing.
China’s cotton-reserve policy will probably determine prices in the near term, Morgan Stanley said in a report dated Aug. 28.