It’s the selling season again! Since the rotation of cotton reserves, the cotton market has not stopped due to the rotation of reserves. Instead, it has performed the drama of “increasing sales” and “shooting higher and falling back”. On the 17th, the National Development and Reform Commission and the Ministry of Finance jointly issued the “About “Notice on Deepening the Reform of Cotton Target Price”, which determines that the cotton target price level will be fixed for three years. The target price level of Xinjiang cotton from 2017 to 2019 is 18,600 yuan per ton. In this regard. Industry insiders said that they have received a “reassurance”. So with so much upstream, how is the performance of the downstream of the cotton spinning industry chain?
Cotton yarn spring demand peak season ahead of schedule
After the Spring Festival this year, yarn trading volume surged. The yarn inventory of most textile companies fell below normal levels, and orders were sufficient. There was no need to worry about orders in April. Textile companies were also optimistic about the market in May, and there were not many orders in mid-to-late February. , it was the textile companies who took the initiative not to sign, and the order situation showed obvious signs of improvement compared with last year. The cotton yarn market is generally improving. In Jiangsu, Zhejiang, Shandong, Henan and other places, the price of conventional yarn has increased by 400-500 yuan, and the price of combed yarn has increased by 500-700 yuan. After the Spring Festival, most companies have maintained full production, indicating that cotton yarn is improving. Direction development, April-May market seems to be expected.
Futures, spot, and reserve sales are currently the dominant one among the three, but Zheng cotton has better quality and has a stronger comparative advantage. After the recent decline of Zheng cotton (the main contract of Zheng futures fell all the way from 16500 to 15170), the advantage It shows that the “cost-effectiveness” of futures warehouse receipts is obviously very high, and the driving force for rebound will be greater.
Judging from the recent external market trends, U.S. cotton is still oscillating and rising, the U.S. dollar’s interest rate hike has landed, the U.S. dollar has a phased positive ending, and bulk commodities have rebounded. With the rebound of bulk commodities, the periodic negative factors brought about by the rotation of reserve cotton are also digested. Zheng cotton will usher in a rebound opportunity and the possibility of returning to above 16,000 increases.
The current downstream demand for gray fabrics is good
This year, orders from cotton gray fabric factories have increased by more than half a month compared to the same period last year. The current orders are until late April, and some weaving factories have orders for two months.
In addition to rigid demand, the improvement in demand means that downstream buyers should purchase more in an environment where raw materials are easy to rise but difficult to fall. There is no need to worry even if inventory is formed. Therefore, part of the reason for the improvement in demand is the increase in speculative demand.
However, the increase in gray fabrics has not been followed up enough, and there is basically no profit in buying and selling now. In February, the price of regular gray fabrics (for clothing) increased by about 2 cents, and the actual orders were also implemented. With the shortage of low-priced cotton yarn stocks from January to February, the demand for replenishment of weaving mills increased. However, the price of cotton yarn has been rising again and again, and the price of gray cloth has been struggling to rise. There is no profit in buying and making now. Taking C32S×32S 130×70 63 “1/1 (jet) as an example, based on the C32S price of 24,000 yuan/ton, the gray fabric cost is about 7.76 yuan/meter, plus 0.2 yuan/meter profit, the quoted price is 8.0 yuan/meter. The current market sales price is 7.9 yuan/meter, and low profits have reduced the enthusiasm of factories for production.
In the short term, the market needs to cool down, and there is great resistance to the continued rise of cotton yarn. However, considering that the inventories of textile enterprises are still low, even if the yarn price falls back, the range may still be around 200-300 yuan/ton. Therefore, it is not recommended that weaving mills are overly bearish. Looking at the next two to three months, if the price of cotton yarn can remain stable, it will only be a matter of time before the price of cotton cloth rises. However, whether the price of cotton yarn can remain stable depends on the changes in the inventory of yarn mills after the arrival of the off-season in mid-May.
Currently, U.S. cotton prices have returned to the mid-to-high level before the sharp rise. As U.S. cotton exports continue to grow rapidly in the near future, market prices are expected to still have room to rise. However, rising prices will attract an increase in sown area this spring, which will put a certain amount of pressure on new cotton prices.
Currently, ICE and Indian cotton prices remain high, giving domestic cotton companies, traders, and speculators confidence that inventories will increase. Especially after the Fed’s interest rate hike expectations are digested, it is more likely that ICE’s main contract will hit the 80 cents/pound mark again.
At present, the cotton price in India is relatively high, and the yarn price is expected to have no advantage in the future. The price advantage of Vietnam’s yarn is still obvious. However, worker wages and energy prices in Southeast Asian countries are rising. Recently, yarn quotations from Vietnam, India, Pakistan, and Indonesia have been rising, which has exceeded the consumption capacity of domestic buyers. This has made domestic weaving mills turn to domestically produced yarn. It is expected that domestic For textile companies, there is still room for expansion in both price and sales of cotton yarn, supporting domestic cotton prices.
It is understood that because futures yarn quotes from Vietnam, India and other origins are more than 1,000 yuan higher than domestic cotton yarn (C32S A yarn is over 1,200 yuan/ton), domestic downstream weaving mills, traders, and purchasing focus have all turned to domestic small and medium-sized textile enterprises.
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