China Rolls Out Cotton Reserve Auction Plan

 

FRIDAY, 2016-April 15:

 

Today, April 15th, the National Development and Reform Commission (NDRC) and the Ministry of Finance (MOF) jointly issued a notice to regularly auction off national cotton reserves.  We summarized the highlights for your review and further internal distribution as you see appropriate.   We will follow an analysis next week.

 

  • China will follow a principle which is to mainly auction off current reserves and moderately refill new reserves.  The National Cotton Exchange is responsible for the release based on an open bidding process.

 

  • China will regularly auction off the reserves from March to August each year.  The Chinese government set a cap for daily auction amount at 50,000 MT at dynamic market price.  The price will be updated on a weekly basis.

 

  • The sales of cotton reserves will halt from September to the following February when the new domestic cotton harvest is in the market.  During this period, the Chinese government plans to purchase high quality cotton to refill their reserves at market price.  The total refill amount will not exceed 30% of the total amount for the reserves sale.

 

  • For 2015/16 auction, China will release cotton reserves from May 3rd to August 31st, The daily auction amount will not exceed 30,000 MT, and total amount will not exceed 2MMT.  The auction will give priority to imported cotton.

 

Provided by Yuan & Associates

 

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