Russia's Cotton Imports Fight A Three-Year Slump

By Anna Mitrofanova|March 17, 2009

In 2006, Russia imported 292,000 tons of raw cotton, sufficient to meet the needs of local spinning mills. A steady decline of raw cotton imports has been noted over the past three years. The demand for cotton has decreased from year to year as spinning factories are experiencing increased competition from Central Asia’s yarn suppliers.

Cotton is imported by Russia from Central Asia’s countries and Azerbaijan. Until two years ago, nearly half of Central Asian cotton came into Russia though third-party countries, mainly Latvia. In 2006, more than 99% of supplies were realized directly from cotton growing countries. Uzbekistan’s share in the imports pattern is gradually declining, ceding its place to cotton of other CIS countries. In Uzbekistan, trade in cotton is being controlled by the government, causing certain inconveniences to buyers. First of all, there is a complicated payment system, and it is impossible to buy cotton in small lots. Now, many Russian traders are preferring to buy cotton in Kyrgyzstan, Tadjikistan or Kazakhstan. Nevertheless, Uzbekistan continues to remain a major cotton supplier for Russia.

During the proliferation of the USSR, production capacities for cotton yarn were mostly located in Russia. Central Asian republics supplied mainly raw cotton to Russian spinning mills, and only a small part of cotton crop was processed at local textile factories. After the break-up of the USSR, Central Asian states were practically without production base. At the spinning mills “inherited” from the USSR-era, low quality yarn was produced due to the lack of funds for modernized production. In recent years, investments realized in the textile industries of Uzbekistan, Turkmenistan and Kazakhstan yielded positive results. The quality of yarn produced has improved, but the price remains lower than in Russia due to the low cost of manpower.

Many Russian weaving and knitting mills are increasingly processing yarn originating from Uzbekistan and other Central Asian countries, while it is getting harder for Russian spinners to preserve their position in the domestic market. In recent years, there has been a gradual decrease in yarn production in Russia, dropping 11% between 2003 and 2006. The production of cotton fabric, representing about 80% of Russia’s total fabric output, is developing more stably, with a fall of around 5% between 2003 and 2006. Decrease in production results from the restructuring of small, unprofitable textile mills. Such a “reorganization” is thought necessary for a recovery of the industry.

Until recently, the state did not offer practical support to enterprises of the textile industry. However, numerous appeals from labor union organizations to governing bodies of the country, long at last, have yielded the first results, which can be summarized as follows:
• The government has allocated funds for partial compensation for the cost of credits obtained by enterprises for raw materials and equipment;
• Duties on imports of textile machinery have been temporarily abolished;
• Administrative measures have been imposed for “grey” imports restraint;
• A development program for the textile industries is being worked out at the government level.