Cotton Related Enterprises Call For Continued Reduction Of Railway Freight Of Cotton

Since February 7, Urumqi Railway Group Co., Ltd. has adjusted the cotton price difference coefficient of railway freight at each departure station in Xinjiang, with the 60 ton lint box car floating down 10% and the 70 ton lint box car floating down 23%. Since August 27, 2023, the Urumqi Railway Bureau has raised the railway freight and cotton price difference coefficient of each departure station in Xinjiang to lower (the southern Xinjiang region implements the downward standard of 35-45%, the northern Xinjiang region implements the downward standard of 28-38%, and the surrounding areas in Urumqi implement the downward standard of 30-40%), and then lowered it again. The lint transfer costs of cotton flower traders, inland cotton textile mills, and Xinjiang ginning mills have further decreased, It is conducive to the recovery of railway freight volume of cotton during the Spring Festival, while the pressure of highway transportation is partially relieved.

However, from the feedback of cotton enterprises inside and outside Xinjiang, it is generally believed that the reduction of cotton freight rate of Urumqi Railway Bureau is relatively limited. For the shipping enterprises, the downward floating of cotton price difference coefficient has little incentive effect on the transfer of public transportation to railway transportation and the use of railway transportation. The relevant departments are called on to continue to significantly reduce the freight rate of cotton railway transportation and give profits to cotton related enterprises.

On the one hand, from September 1, 2022, the transportation subsidy for Xinjiang cotton going out of Xinjiang will be reduced from 500 yuan/ton to 300 yuan/ton. For shipping enterprises, the freight that needs to be paid by themselves will increase significantly, and the pressure on funds will also be large. Enterprises hope that relevant departments will continue to reduce the freight and make profits to cotton related enterprises, to offset the negative impact of 200 yuan/ton reduction in transportation subsidies; On the other hand, considering that the costs of inbound and outbound storage, warehousing, insurance, etc. of inland warehouses are higher than those of domestic regulatory warehouses, and that road transportation has the advantages of timely delivery, high performance rate, and the realization of point-to-point, warehouse to factory, it may be difficult to change the situation in the first half of 2024 when road transportation is dominant, supplemented by railway transportation.

Most small and individual Xinjiang ginning plants or cotton traders have great difficulty in applying for railway wagons (they need to report the flow direction one month in advance). Although they can entrust some commercial companies to ship on their behalf, the actual cost of railway transportation is also increasing. Moreover, as the domestic heating season enters the middle and later stages, the pressure of energy and other transportation is relieved and the spring transportation is more than half way through, it is expected that the number of empty box cars allocated by Urumqi Railway Bureau to various platforms in Xinjiang will increase in February and March, which needs to attract cotton traders, inland cotton mills, and Xinjiang ginning mills to increase the use of railway transportation.