Indonesian firm cancels cotton imports due to crisis

Indonesian firm cancels cotton imports due to crisis

SYDNEY (Reuters): An Indonesian cotton mill has canceled a contract for the purchase of about 10,000 tons of Australian cotton from Namoi Cotton Co-operative Ltd.

But shipments to Indonesia had not been seriously affected by its economic crisis, Namoi chairman Stuart Boydell said.

The mill, which Boydell would not name but described as one of the smaller operators, compensated the co-operative for any losses involved and the cotton was shipped elsewhere, he told Reuters.

Some smaller Indonesian spinning mills were understood to have closed because of the financial crisis but none of the larger ones which Namoi dealt with had shut down and Namoi did not know of any large mills which had closed, he said.

Namoi supplies raw cotton to PT Argo Pantes, PT Dan Liris and other mills in Indonesia. Indonesia is Namoi's largest customer, taking about 30 percent of its ginned cotton.

Other main customers are Japan, as number two, China, Thailand and South Korea.

Almost all of Namoi's 1997 season cotton had been shipped without problems although there had been some slowing of exports and letter of credit difficulties from Indonesia, he said.

Problems were not anticipated in moving the 1998 crop, although the financial crisis in Asia remained a concern, Boydell told reporters during an inspection of Namoi's facilities at Wee Waa.

The northwestern New South Wales town was the birthplace of the Australian cotton industry in the 1960s. The site inspection accompanied the announcement by Namoi of its public share float.

After a strong surge in Australian cotton production to about 2.7 million 500 pound bales in 1997 from only 373,000 bales in 1980, Namoi sees strong steady growth continuing into the future despite the Asian crisis.

Namoi is one of Australia's leading cotton producers and marketers, handling 27 percent of Australia's production.

While Australia's production was just three percent of the world total, with about 90 percent of Australia's cotton exported the country is now the third largest cotton exporter in the world after the United States and Uzbekistan.

It is also one of the most exposed to Asia's crisis.

Namoi said that about 70 percent of its exported cotton was re-exported as yarn or finished product, providing a natural hedge against Asia's financial crisis.

He said that although Indonesia's domestic market was under pressure, it accounted for only 30 percent of the cotton it imported, he said.

Pakistan and India were also entering the market for imported Australian cotton this year, he said.

"At this stage we're still reasonably confident."

Jones also said that Australia could quite possibly produce 3.0 million bales of cotton in 1998, up from the 2.72 million bales produced in 1997 and ahead of the official estimate of 2.85 million bales for 1998.