Recently, polyester raw materials such as PTA, polyester chips, and polyester filament have been running smoothly, ending the ups and downs trend. Nylon and spandex fell rapidly and by a large margin. Under the shadow of the off-season, it is understandable that upstream raw materials are weak or plummeting. However, only cotton has bucked the trend and has risen recently. Is “demon cotton” back?
The extreme weather in 2022 is increasing the risk of global crop production decline. Among them, cotton has been hit the hardest, with major global cotton supply countries such as the United States, Brazil, and India all experiencing varying degrees of production cuts.
According to Bloomberg, rare dry weather in Texas, the main cotton-producing area of the United States, may cause U.S. cotton production to drop by 28% in the third quarter, to the lowest level in more than 10 years.
Brazil, the second largest cotton exporter, also suffered from high temperature and drought weather, which reduced the country’s cotton production by nearly 30%.
In addition, India, the world’s largest cotton producer, suffered from heavy rains and pests and diseases this summer, resulting in a significant reduction in cotton production in India.
Affected by this, the price of cotton futures on the Intercontinental Exchange in the United States has continued to soar since July 15, with a cumulative increase of 39.5%. Global cotton prices continue to soar, so will the domestic cotton market be affected, and what will be the price of cotton?
Domestic cotton supply is sufficient
Similarly, since July 15, the price of cotton futures on the Zhengzhou Commercial Exchange has risen from 13,920 yuan/ton to 14,945 yuan/ton, an increase of 7.36%. The domestic spot price rose from 14,700 yuan/ton to 15,550 yuan/ton, an increase of 5.78%. Obviously, compared with US cotton, domestic cotton has insufficient momentum to rise. The main reason for this is that there is no extreme weather in the country. On the contrary, there has been sustained high temperature weather in the country this year. On the contrary, cotton production will increase due to high accumulated temperature and sufficient photosynthesis. In other words, my country’s cotton production is expected to increase this year, the supply is sufficient, and the impact of production cuts in the three major cotton countries on domestic cotton prices is gradually weakening.
Demand from downstream companies is sluggish
At the same time, driven by the strength of US cotton, the cost support of pure cotton yarn is relatively strong, some inventories are low, and the price of pure cotton yarn rises. According to the downstream market, the company’s shipment situation has improved, mainly yarns suitable for autumn and winter fabrics. According to statistics, the inventory of finished products in the domestic pure cotton yarn industry is 38.39 days, a decrease of 0.59 days from last week and a month-on-month decrease of 1.51%. However, the downstream off-season is still not over. Due to demand constraints, the overall increase in pure cotton yarn is still limited. If demand does not increase, the short-term cotton market will still be difficult to get rid of the weak atmosphere, and the subsequent rise will be weak.
Although the off-season will soon pass, it is still up in the air whether there will be an outbreak of market conditions during the traditional peak season. At present, according to the analysis of the downstream weaving market, some new orders have begun to loosen up, and foreign trade orders have recovered significantly, especially cotton clothing, socks, and underwear. However, the number of new orders is limited. Order placement in the domestic market is still not smooth at present, with orders being placed sporadically. Therefore, the downstream weaving situation remains weak. According to data, the current comprehensive operating rate of pure cotton yarn companies is only 53.35%, which is still far behind the 76.59% operating rate in the same period last year.
The global epidemic broke out and panic surged. An outbreak of “tomato flu” broke out in India, with more than 100 children infected; on August 19, Japan reported more than 260,000 new cases, setting a new high since the epidemic; in the past week, nearly 7,500 new cases of monkeypox were reported globally cases, a 20% increase, with most reported cases coming from Europe and the Americas.
In the context of the severe global epidemic situation, the panic index has risen and residents’ consumption levels will decrease again. Coupled with severe global inflation and sharp rise in prices, this will be a fatal blow to the rebound in clothing buying sentiment. The continued rise in inflation has pushed up the prices of a variety of daily consumer goods, and “optional consumer goods” represented by clothing, shoes and hats are facing greater sales pressure. Just a few days ago, Wal-Mart canceled “billions of orders” in response to the accumulation of inventory accumulated in the past few quarters. This is a living “blood lesson”! Then new orders in the downstream are relatively limited, and the demand for cotton is not In the case of big improvement, cotton’s motivation to rise sharply is weak.
In the future, domestic cotton supply will be loose, and its price trend will be more dependent on the demand side. If the autumn and winter orders perform well, it will drive a wave of spot transactions, and cotton will have the opportunity to continue to “turn around”.
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