Chinese cotton mills told to stop buying Australian cotton

Cotton millers in China are given an import quota each year and have been told they might not receive the allowance if they buy from Australia.

Australia's ties with top trade partner China soured in 2018 when it became the first country to publicly ban China's Huawei from its 5G network, and worsened after Canberra called for an enquiry into the origins of the coronavirus.

Chinese spinning mills have been told to stop buying Australian cotton and the industry could soon face tariffs of up to 40 per cent.

The value and volume of Australia's cotton exports are volatile, but are now worth around A$1 billion ($710 million) a year after benefiting hugely from a hike in Chinese tariffs on US-produced cotton.

Australian cotton growers could be the latest victims of increasingly bitter trade tensions with China.

"Impeding the ability of producers to compete on a level-playing field could constitute a potential breach of China's global undertakings, which would be taken very seriously by Australia", he said.

'Despite these changes to our industry's export conditions, we know Australian cotton will find a home in the global market, ' said Adam Kay, Cotton Australia and Michael O'Rielley CEO and Australian Cotton Shippers Association chair.

The suspension of cotton purchases comes just days after Canberra scrambled to confirm reports of another suspension ordered by China, of coal buys from Australia.

Two China-based cotton traders said many mills had received verbal instructions early this week or the last. "The Australian cotton industry has earned a reputation as a reliable global supplier of cotton with fast shipping times to export destinations and reliable delivery".

"It's very supportive to the price of high-grade cotton", said one trader, adding that this year's domestic crop included a smaller proportion of high-grade fibre.

China imported about 400,000 tonnes of Australian cotton in 2019, customs data shows.

Cotton producers and exporters said that they were trying to get clarity on the new rules of the game but indicated they may look to other markets.

China hits Australian barley with anti-dumping and anti-subsidy duties totalling 80.5% from May 19, with the duties expected to last five years. China on Tuesday also said it had begun an anti-dumping probe into Australian wine imports.