CHINA will extend auctions of its State reserve cotton for an additional month to meet strong demand from spinning mills, in a move that may ease demand for imports in the world’s top textile market.

    The additional sales — widely anticipated by the market — were confirmed by the National Development and Reform Commission and the Ministry of Finance in a document dated Aug. 5 and posted on the China Cotton Association website yesterday.

    The total amount offered could also exceed the 2 million tons initially slated for sale, depending on demand, the document said. Chinese warehouses held around 11 million tons before the sales began, or about half of global stocks.

    The government has already sold 1.7 million tons from its reserves since daily auctions began in May, or 98 percent of the offered volumes, as mills raced to restock after clearing out inventory ahead of the sales.

    Participation by traders in the sales has also boosted the purchasing volumes, say industry participants.

    But with strong demand pushing up prices, textile mills urged the government to increase the volumes on offer.

    Expectations that the sales would be extended hit demand at the auctions last week, pushing down average selling prices and dragging on domestic futures.

    Lower domestic prices made it less attractive to buy from overseas, said one trader who declined to be identified.

    “Earlier in July there was quite active demand for imports and now it has slowed down a bit,” he said.

    Another said impact on imports would be limited, given the recent rally in global cotton prices. Futures on ICE are at two-year highs, boosted by weather concerns in the United States and India.

    “ICE at this level won’t encourage buyers too much,” he said.

    Good conditions for China’s crop to begin harvesting in October would also dampen demand at the reserve sales, he added.

    “Things are going pretty well in most areas of Xinjiang. I don’t feel any panic in the market.”

    (SD-Agencies)