Could cotton linter import of China regain momentum in H2 2023?

Cotton linter import of China retreated again in 2022 after witnessing a blow-out growth in 2021 as the total volume was around 90kt, down 54% y-o-y. The import in the first and second half of 2022 was respectively 69.4kt and 20.6kt. The decline was rarely seen for years, which was mainly because that the stocks of Chinese cotton linter at the end of second quarter increased sharply y-o-y, and there was consumption of old linters and arrival of new resources in the second half of year, lead to a steep reduction of import volume.

In the first two months of 2023, the import volume remained low around 1.6kt, but started to recover since Mar. In the first four months of this year, the imports amounted to 45.2kt, a y-o-y decline of 74% from the same period of 2022 (11.8kt).

The import was expected to recover in the second quarter and afterwards because there was still willingness and dependency of imports when the price gap between Chinese and imported cotton linter was large at present. However, due to the large beginning stocks of Chinese cotton linter and sluggish downstream demand, the year-on-year decrease in demand mostly came from imported cotton linter with poor cost performance.

The origins of imported cotton linter are expected to see big changes since the second quarter. Brazil, India and Central Asia take the leading position with total percentage of more than 80%. Among them, India has been the largest source of China's imported cotton linter for many years, accounting for more than 40%. In recent years, China produced less cotton linter pulp, and the import of cotton linter from India has dropped sharply, but is expected to recover this year. Affected by the Turkish earthquake and the cost performance of products, the import volume from Turkey is small, but may increase later. There are more imports from Brazil and Central Asia with the consumption trend of resource diversification in China.

The end-user demand of China and price gap between Chinese and imported cotton linter largely decides the import volume, which may be increasing when the price difference is large and demand is good. The import was low in the first two months of this year and already started to rise since Mar, which is likely to improve further.