Vietnam Turns Second Largest Cotton Importer Close On Heel To Bangladesh

Market Intelligence

Vietnam Turns Second Largest Cotton Importer Close On Heel To Bangladesh

Vietnam has emerged as the second largest importer of cotton in the current financial year 2015-16 as per the statistics from USDA. They are next only to Bangladesh in the table of importers and both the countries over took China in the last season. Till 2012-13 season, China was the leading importer with a massive 20.3 million bales (of 480 lb) but subsequently its imports dipped to 14.1 million bales in 2013-14 before sliding to 8.3 million bales in 2014-15.

Ever since China has piled up a massive stock of cotton and has laid restrictions on its import. In the last season, China has imported only 4.4 million bales which is almost equivalent to the minimum quantity obligation that the country has under WTO agreement. Bangladesh, which used to import 5 million bales till the 2012-13 season, has steadily increased its import of cotton over the years to 6.2 million bales in 2015-16.

Contrastingly Vietnam which used to import 2.4 million bales of cotton till 2012-13 season, has shot up in its import figures steeply over the past four years. In 2015-16 season, its import figures stand at 4.5 million bales of cotton which to touch 5 million bales in the current season (2016-17). The Chinese story is that they wanted their industry to use up the piled up cotton from the state reserve first. This made them lower the import volumes and levy a tariff of 1 percent on imports. As large portion of the China’s cotton reserve still in the warehouse, the country is no more the top importer of cotton.

There is a close tussle between Bangladesh and Vietnam for the top spot in cotton imports as indicated by the figures. Way back in 2012-13, the Vietnamese cotton imports were less than half of Bangladesh. However, the situation changed rapidly because of heavy pouring of foreign investments into Vietnam textile sector following an array of Free Trade Agreements (FTAs) including the TPP. As investment in Vietnamese textile sector soared steeply, so did the cotton imports of Vietnam placing it among the two most significant cotton markets.

In the 2013-14 season, Vietnam imported 3.2 million bales of cotton. However, the subsequent two seasons turned out to be the threshold years for Vietnamese cotton imports with import figures reaching 4.3 million bales and 4.5 million bales respectively. In the current season, with more investments in textile sector, Vietnam might cross the 5 million bale threshold any time soon.

For the current season, Bangladesh and Vietnam are going to make up for the one third of the global cotton imports. The status quo is unlikely to change in the near future as China has huge piled up stocks which to last for another two to three years! This is also an indication that the Vietnam’s textile industry export is going to witness an unprecedented boom in the coming years. If the current trend of foreign direct investment (FDI) continues to spiral as it has in the previous few years ( and TPP survives in the Trump era), Vietnam might well overtake Bangladesh and turn into the top importer of cotton.