Beijing snubs Australian cotton imports

China cotton mills told to avoid buying Aussie bales

Agribusiness
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Agricultural exports face new China barriers after apparent changes to cotton sales conditions

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After a week of rumours about Chinese spinning mills being ordered to halt Australian cotton purchases, the industry's peak bodies have confirmed traders are facing "apparent changes to export conditions to the People's Republic of China".

Cotton Australia and the Australian Cotton Shippers Association were "working to understand" the implications of last week's moves by China's National Development Reform Commission to discourage mills from using Australian cotton.

With more than 60 per cent of Australian cotton sold to China, growers and traders have been nervous for some months about this year's spike in farm commodity trade bans and diplomatic tensions between the two countries.

Speculation is now rife that cotton from Australia, one of the world's major exporters of the fibre, will face tariff barriers of up to 40pc or more.

Australia typically sells about $800 million worth of cotton to Chinese textile mills each year, although the past year's total Australian crop was just 600,000 bales - well down from the big 4.6m bale crop in 2018.

Buying "discouraged"

"It has become clear to our industry that the National Development Reform Commission in China has recently been discouraging their country's spinning mills from using Australian cotton," said a joint statement from Cotton Australia chief executive officer Adam Kay and cotton shippers chairman Michael O'Rielley.

"To now learn of these changes for Australian cotton exports to China is disappointing, particularly after we have enjoyed such a mutually beneficial relationship with the country over many years.

"Our industry's relationship with China is of importance to us and is a relationship we have long valued and respected."

Traders, however, have confirmed "a lot of caution about doing business with China" in recent months, especially in the wake of this year's collapse of Chinese-owned buyer Weilin Trade, based in southern NSW.

Weilin was caught out after paying premium prices for as much of 40pc of last season's crop for processing in Chinese mills which suddenly did not fulfill their order expectations.

"This latest news from China has not necessarily come out of the blue," one marketer noted.

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Already this year China has targeted Australian beef, barley and wine, and this week its steel mills were reportedly ordered to slow down imports of coking and thermal coal.

Home Affairs Minister Peter Dutton said the government was working closely with the cotton industry to ensure exports could make it to market.

Cotton Australia also confirmed industry officials were working with the federal government, including the trade and agriculture ministers' offices, to "investigate the situation and fully understand what is going on".

Trade Minister Simon Birmingham said his department had sought clarity from Chinese officials.

He urged China to rule out any use of discriminatory actions against Australian cotton producers.

Serious implications

"Impeding the ability of producers to compete on a level playing field could constitute a potential breach of China's international undertakings, which would be taken very seriously by Australia," he said.

Our cotton exporters had worked hard to win contracts and establish themselves as reliable suppliers of high quality cotton to China.

Senator Birmingham noted the trade was important for many Chinese businesses, too.

Mr Kay and Mr O'Reilley emphasised Australian cotton was still in demand elsewhere around the globe and could attract strong price premiums due to its high quality, sustainability credentials, reliability and a track record in meeting manufacturer demands.

Other major export buyers include Indonesia, Vietnam, India, Bangladesh, Turkey and Thailand.

They said Australia enjoyed a reputation as a reliable international supplier with fast shipping times to export destinations and reliable delivery.

Other export options

"Despite these changes to our industry's export conditions, we know Australian cotton will find a home in the international market," their statement said.

"The Australian cotton industry has long enjoyed positive relationships with the many other countries we export to, and we look forward to continuing and developing those other relationships further."

"The industry will continue having meaningful conversations with stakeholders to fully understand this situation, and we will continue working with the Australian Government to respectfully and meaningfully engage with China to find a resolution."

- With AAP

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