* China to issue about 1 mln T extra import quotas
* Zhengzhou cotton futures prices traded limit-down
* Beijing unlikely to release its reserves
(Updates futures prices in paragraph 6)
By Niu Shuping and Ken Wills
BEIJING, May 11 China, the world's top cotton
consumer, will soon issue about 1 million tonnes of extra cotton
import quotas to help textile mills buy cheaper overseas cotton
to cut costs, traders said on Friday.
The extra quotas, which would allow imports at sliding
tariffs between 5 and 40 percent, would bring total import
quotas issued so far this year to about 2.4 million tonnes, they
Traders had expected government authorities to issue the
extra quotas and have stockpiled a large volume of cheap cotton
at the country's bonded warehouses.
"Some textile mills made some new purchases last week while
others are still waiting as domestic cotton prices are falling,"
said one trading manager at an international trading house.
"Demand from textile mills is sluggish, some are running at
only 30 to 40 percent of production capacity due to fewer export
orders," said the manager.
The expectation of a large increase in imports has pressured
local futures prices. The most-traded September price
was traded down to its daily limit of 4 percent in the afternoon
session at 19,685 yuan ($3,100) per tonne, the lowest level
since September 2010.
The market also tracked weaker U.S. cotton prices overnight.
New York cotton prices closed down the daily limit and at
their lowest in nearly two years on Thursday after the U.S.
Department of Agriculture (USDA) forecast record world cotton
supplies in 2012/2013.
Even so, domestic cotton is still more than 10 percent
higher than the same quality international cotton supplies.
"There are not many high-quality cotton supplies available
from the U.S. market and premiums are high as well. Indian
cotton is of low quality, we expect new sales from Brazil will
pick up," said another cotton executive.
The International Cotton Advisory Committee said early this
month that the boost in Chinese imports will more than double
China's cotton stocks to 5 million tonnes in 2011/12, and
shipments from India, Brazil and Australia could reach record
China imported about 1 million tonnes of cotton last year to
replenish depleted state cotton reserves.
Traders also believe Beijing is unlikely to release cotton
from its state reserves, after it stockpiled 3.13 million tonnes
from last year's domestic harvest.
"The government cotton prices are very high, given that
domestic cotton is weakening and we suspect the government would
not sell its reserves now," said the executive.
Some textile mills reached by Reuters said they expect more
quotas to be issued and will source cheap cotton from bonded
"Imported cotton is much cheaper and we are still interested
in buying either Indian or Pakistan cotton from bonded
warehouses," said one manager with a textile mill in the
northern province of Shandong.
Traders estimated more than 300,000 tonnes of cotton has
been stockpiled at bonded warehouses in Shandong, a major cotton
China imported 3.36 million tonnes of the fibre last year,
of which one third came from India, with the United States being
the second biggest provider.
Analysts expect domestic cotton consumption in the year
ending August will fall to 7-9 million tonnes, compared with 10
million tonnes in the previous year.
China's textile exports have been hurt by weakening global
demand, with exports in the first four months of the year
declining 0.3 percent from a year ago.
($1 = 6.3140 yuan)
(Additional reporting by Coco Li; Editing by Edwina Gibbs and