The China and Australia relationship continues to worsen, after year-long rhetoric of indirect allegations, declining common trust and repressed trade agreements. Impacting, the Australian cotton industry with the likely loss of its 611 million Australian dollars cotton trade to China.
Australia’s cotton industry is entirely dependent on exports and China is one of the country’s main markets.
Undeniably, the cotton industry is one of Australia’s most important contributors to the agricultural sector, with yearly exports worth around 2 billion dollars. Australia is one of the world’s top four cotton exporters, competing in a deeply subsidized international market.
Australia’s cotton needs reviving
In a recent opinion piece for ‘Queensland Country Life’, Michael ORielley, Chairman, Australian Cotton Shippers Association, says that the industry needs to move on, which “means reviving established markets and growing markets where consumption of Australian cotton is smaller.”
ORielley highlights the prospects that markets such as South Korea, Japan, Indonesia and Thailand harvest, recalling that “Australian cotton has been sold into most Asian and sub-continent markets for a long time and it is these traditional Asian markets where Australian cotton earned its reputation as a reliable supplier of high-quality fiber – and it’s a reputation that still holds firm today.”
Unlike China, India, or Pakistan, those traditional markets for Australian cotton do not have their source of supply of local production, which makes them completely dependent on imported cotton.
Japan and South Korea, for instance, remain significant purchasers of Australian cotton, according to ORielley, even if they have seen their respective spinning companies relocated to other more competitive markets including Indonesia, China and Vietnam.
Though the number of spinning companies in Indonesia and Thailand demanding Australian cotton has declined since the late 1990s, these markets still recognize Australian cotton’s quality.
Indeed, Indonesia was Australia’s largest market before it was passed by China. As a net cotton importer, the Indonesian market continues to be primarily a yarn producer and exporter as opposed to a fully integrated garment producer.
“Indonesia as a potential growth market will certainly be on our radar for more bales to flow into,” said ORielley.
Noteworthy, Australian cotton must contest with Brazil and US cotton not only in Indonesia but also in Vietnam, another potential expansion market.
The U.S. remains the leading cotton supplier to Vietnam, with more than a 48% share of Vietnam’s total cotton imports. Brazil, India and Australia, in that order, make up another 40% of the cotton imports.