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Voluntary Report - public distribution

**Date:** 11/7/2003

**GAIN Report Number:** TW3046

TW3046

**Taiwan**

**Cotton and Products**

**Cotton Update - November 2003**

**2003**

**Approved by:**

![](media/image1.wmf)Jonathan Gressel

American Institute in Taiwan

**Prepared by:**

Eric Trachtenberg & Chiou-Mey Perng

**Report Highlights:**

The relatively quick passage of the Severe Atypical Respiratory Syndrome
(SARS) crisis in summer 2003, boosted textile production, allowing
cotton imports to rise to 265,000 mt in MY02/03. Imports are expected to
decline sharply in MY03/04 to 210,000 tons because of high cotton
prices, uncertainty over a return of SARS and the long-term decline in
Taiwan's textile industry. The U.S. market share for imported cotton
will also likely return to the historical average of between 30 and 35
percent from 54 percent in 2002. Note: PSD now contains most recent
Official USDA numbers.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Taipei \[TW1\]

\[TW\]

**Table of Contents**

[Executive Summary 3](#executive-summary)

[Consumption 3](#consumption)

[Trade 3](#trade)

[Composition of Imports 3](#composition-of-imports)

[PS&D Table: Cotton 4](#psd-table-cotton)

[Import Trade Matrix: Cotton 5](#import-trade-matrix-cotton)

# Executive Summary

Post revises MY02/03 cotton imports to 265,000 mt based on trade data
and forecasts a further decline in MY03/04 to 210,000 tons because of
high cotton prices and the long-term decline in Taiwan's textile
industry. U.S. market share will also likely return to a more normal 30
and 35 percent from a historical high of 54 percent in 2002.

# 

# Consumption

A quick resolution to the Severe Atypical Respiratory Syndrome (SARS) in
June-July 2003 boosted textile production and cotton consumption above
previously forecast levels to 270,000 mt in MY02/03 or 1.2 million
bales. However, cotton consumption is expected to decline further in
MY03/04 to 220,000 tons or 1 million bales because of high cotton prices
and the continuing long-term decline in Taiwan's textile industry.

High cotton prices will likely depress cotton imports because they
encourage substitution to artificial fibers and raise the costs of
importing. In addition, volatility in the cotton market and a concern
about a return of SARS may also depress consumption. Although yarn
prices are up by 33 percent in the last two months, business remains
slow because textile producers are holding out for further increases to
cover their higher expenses. This has encouraged mills to stretch out
their inventory by slowing down production.

Over the long-term, Taiwan's textile industry is facing increasing
competition in its traditional domestic and export markets from the PRC,
especially in low cost items such as cotton denim fabric and low count
yarns. Taiwan's competitiveness continues to erode because of high
wages, expensive land, a lack of branding expertise, and increasing
competition from other Asian countries.

Taiwan has an estimated 1.7 million active spindles, a dramatic fall
from 2.8 million in mid 1999. The spindle total is expected to continue
falling by 100,000 a year. Industry sources note that these numbers do
not reflect actual capacity ulitization because each spindle is idle
more often than in the past.

# Trade

Since Taiwan's cotton consumption is supplied entirely by imports,
demand and imports move together. Total imports in MY03/04 are expected
to total only 1 million bales (220,000 mt). Lower imports will also help
push stocks down to 87,000 in MY03/04. Taiwan's MY 02/03 imports totaled
1.2 million bales (265,000 tons), sharply down from 1.5 million bales
(333,000 mt) in MY01/02.

## Composition of Imports

U.S. market share is expected to fall to the historical average of
between 30 and 35 percent in MY03/04 as Taiwan importers seek to cut
costs. Pakistan and Brazil are expected to gain because of low offer
prices for middle grade cotton. Contacts report that Brazilian cotton is
entering Taiwan at 64 cents versus 83 cents C&F for U.S. product.

U.S. market share is not expected to decline further because of U.S.
price competitiveness, consistent quality and reliable delivery. In
2002, low prices gave the U.S. an unprecedented 54 percent of the cotton
market with total exports exceeding 830,000 bales. In MY 00/01, the U.S.
had a market share of 32 percent, which is close to the pre-2000
historical average.

Taiwan also permits the import of PRC cotton, unlike most PRC
agricultural products. Since the entry of Taiwan and the PRC into the
WTO, Mainland cotton imports have increased sharply and will likely pose
strong competition for the U.S. in years to come.

# PS&D Table: Cotton

  -------------------- ---------- ---------- ---------- ---------- ---------------- ----------
  PSD Table                                                                         

  Country              Taiwan                                                       

  Commodity            Cotton                                      (HECTARES)(MT)   

                       2001       Revised    2002       Estimate   2003             Forecast

                       USDA       Post       USDA       Post       USDA Official    Post
                       Official   Estimate   Official   Estimate   \[Old\]          Estimate
                       \[Old\]    \[New\]    \[Old\]    \[New\]                     \[New\]

  Market Year Begin               08/2001               08/2002                     08/2003

  Area Planted         0          0          0          0          0                0

  Area Harvested       0          0          0          0          0                0

  Beginning Stocks     51383      51383      100807     101578     104944           96920

  Production           0          0          0          0          0                0

  Imports              333339     333240     265409     265342     228613           210000

  TOTAL SUPPLY         384722     384623     366216     366920     333557           306920

  Exports              871        0          0          0          435              0

  USE Dom. Consumption 283045     283045     261272     270000     261272           220000

  Loss Dom.            0          0          0          0          0                0
  Consumption                                                                       

  TOTAL Dom.           283045     283045     261272     270000     261272           220000
  Consumption                                                                       

  Ending Stocks        100807     101578     104944     96920      71850            86920

  TOTAL DISTRIBUTION   384723     384623     366216     366920     333557           306920
  -------------------- ---------- ---------- ---------- ---------- ---------------- ----------

**Important Note: This table has been revised to contain the most recent
Official USDA numbers.**

# Import Trade Matrix: Cotton

  --------------------- ---------------- ------------------- -------------
  Import Trade Matrix                                        

  Country               Taiwan                               

  Commodity             Cotton                               

  Time period           08/2001          Units:              metric ton

  Imports for:          2001                                 2002

  U.S.                  86250            U.S.                116952

  Others                                 Others              

  China                 26000            Togo                28612

  Togo                  22600            China               24350

  Uzbekistan            17000            Uzbekistan          15815

  Australia             16300            Australia           13982

  Cote D\'Ivoire        11260            Cote D\'Ivoire      10956

  Mali                  8300             Mali                9032

  Burkina Faso          4200             Burkina Faso        5925

  Tanzania              4100             Uganda              4656

  Uganda                4000             Benin               4363

                                                             

  Total for Others      113760                               117691

  Others not Listed     19990                                30699

  Grand Total           220000                               265342
  --------------------- ---------------- ------------------- -------------