Southeast Asia nudges aside China as India's top raw cotton buyer

India's sales of raw cotton to southeast Asia are expected to more than double in 2013, toppling China from its position as the top customer of the world's second biggest producer of the fibre, traders and industry officials said on Friday.
To evade an import duty on raw cotton, textile mills in China prefer to buy yarn processed cheaply in Southeast Asian countries such as Indonesia and Vietnam, thus boosting the appetite for raw fibre in those countries.
"Higher cotton yarn imports by China boosted fibre consumption in Southeast Asian countries, which in turn stepped up raw cotton purchases from India," said A. Ramani, secretary of the Indian Cotton Federation (ICF), a traders' body.
Southeast Asian countries as a whole have imported more than 1.6 million bales of raw cotton from India in the marketing year that began last Oct 1, or more than 2.6 times the figure of 600,000 bales in the same period last year.
This year's higher purchases have partly compensated for lower demand from China, which is sitting on huge stocks, and is trying to promote domestic cotton use by imposing a punitive 40 percent duty on imports.
To stay competitive, mills in China, the world's largest textile maker, have turned to the countries of south Asia, as well as Indonesia and Vietnam, whose cotton yarn is cheaper, thanks to low labour costs and geographical proximity. Imports of cotton yarn are free of Beijing's tough quota limits and cost less, traders said.
Cotton yarn imported from Southeast Asia is at least $100 a tonne cheaper than that produced at home, said an official with a Shanghai-based trading firm, who asked not to be identified as he was not authorised to speak to the media.
"Higher cotton yarn imports by China could be an opportunity for Bangladesh, where labour is cheap," said Monsoor Ahmed, secretary of the Bangladesh Textile Mills Association, which groups 1,364 mills in the world's second-largest importer of cotton after China.
Indian traders said freight costs lower than those of US imports have helped boost Indian exports to Southeast Asia, which is gearing to satisfy China's growing appetite for yarn.