The 2007 target for cotton shipments out of Xinjiang Province was completed before the end of 2007. High demand is now evident for shipments of a variety of commodities out of the province, resulting in a shortage of rail cars and railway authorities stating that there will be no additional rail cotton shipments out of Xinjiang until March 2008. This means that the current 2007 stocks of Xinjiang cotton now held in the province´s warehouses will not be available to domestic Chinese mills until near the end of March at the earliest. This has ignited a last minute scramble by merchants and mills to move cotton they have already purchased out west into eastern warehouses. The small cotton producer, Gansu Province, is also impacted by the railway car shortage, with mills scrambling during the final days of 2007 to move cotton out of the region.

These conditions are likely to increase the pressure on domestic mills to focus on imports in order to meet their needs for high grades during the first quarter of 2008. In previous years, logistical issues regarding a delay in moving cotton out of Xinjiang have significantly impacted import demand. This year, the 2007 harvest contained a reduced supply of high grades. In addition, warehouse inventories of Xinjiang high grades were reduced by the 2007 pre-harvest drawdown in China´s domestic cotton stocks. Thus, January through March 2008 cotton imports are likely to be greatly affected by the delay in Xinjiang shipments.

The government has been working diligently to improve the expedition of shipments and avoid any slowdown. Record expenditures on railway modernization have been allocated, which has included increasing railway capacity on the Xinjiang line. Conditions have improved since 2003 when delays of six months or more occurred in domestic mill purchases of Xinjiang cotton. Such an impediment contributed to the surge in import purchases in late 2003, which illustrates just how delays can impact import demand.

Source: globecotnews