Recently, the H&M company’s Xinjiang cotton incident has continued to ferment. Affected by this, the prices of cotton and cotton yarn continued to fall, with a drop of more than 1,000 points. U.S. cotton was the first to fall by the limit on Thursday night, and continued to fall at the opening on Friday to refresh the recent low. Cotton yarn futures continued to have contracts fall by the limit. Compared with the lower limit of the external market, my country’s cotton and cotton yarn futures have relatively smaller declines.
During the interview, the reporter learned that an important reason for the external market hitting the limit on Thursday was that the US cotton weekly export sales report data was not satisfactory, and China canceled part of its 2020/2021 annual purchases.
“Since China is not only an important purchaser of U.S. cotton, but also the country with the largest cotton consumption in the world, the cancellation of purchases has triggered market concerns about Sino-U.S. relations and the prospect of U.S. cotton demand. Combined with The recent news of sanctions on Xinjiang cotton products in Europe and the United States has triggered a massive sell-off in cotton futures.” He Meng, a cotton researcher at Hua’an Futures, said that based on ICE cotton positions in recent weeks, there is a tendency for long funds to continue to flee.
Industry insiders told reporters that the cotton trends in the internal and external markets are both related and independent. Although the internal and external markets seem to be going down hand in hand recently, one common feature is that the impact at the macro level is greater than the fundamental impact on cotton. price has a greater impact. Falling crude oil, a stronger US dollar and other factors outside the industry have pushed domestic and domestic cotton prices lower. Even if we put aside macro factors, China is the largest cotton consumer and the United States is the largest cotton exporter. Both domestic cotton and American cotton are important components of the global textile industry. Zheng cotton and ICE cotton are complementary to each other. .
“The logic of the recent decline in cotton lies in the rapid rise in cotton in the early stage, which led to an increase in procurement costs, and there is also a game in the terminal’s acceptance of the increase. Therefore, we see that after the full resumption of work and production after the holiday , Zheng Mian staged a roller coaster market, and the correction began.” He Meng said. This week, a series of international brands such as H&M banned Xinjiang cotton, which triggered tighter relations between China, the United States and China and Europe. They were pessimistic about the prospects for the use of domestic cotton, pushing Zheng cotton to fall further.
In his view, the reasons for the decline in cotton yarn prices are generally the same as those for cotton, but the difference is that price transmission lags behind, and the overall production and sales situation in the yarn market in recent months has been good. , yarn mills are more willing to raise prices, so overall yarn prices are relatively resistant to falling.
As for the sharp decline in cotton prices in recent days, some market traders are worried that political friction between China and the United States will trigger deeper confrontation, and are worried that simultaneous boycotts by the United States and Europe may have an impact to a certain extent. Terminal export of Xinjiang cotton products. At the same time, the fermentation of public opinion may also bring about emotional panic and irrational trading in the market.
In the opinion of the above-mentioned researchers, the downstream had already shown weak conduction as early as three weeks ago.
From a price transmission point of view, it is difficult to increase the price of clothing orders, but the prices of raw materials in various links have increased significantly due to the good economic expectations in the early stage. The stagnation in price transmission at the clothing end has gradually been transmitted from bottom to top to cotton, causing a significant correction in cotton prices.
From the perspective of order transmission, due to excessive demand expectations before the year, various downstream industry chains accumulated a lot of raw material inventories, and even individual traders also appeared in a financing hoarding pattern. . However, the volume of clothing orders gradually slowed down after the year, and the price of raw materials was too high, resulting in a significant decline in enthusiasm for replenishing raw material inventories. With both prices and order volume declining month-on-month, yarn and cloth traders have cut prices for shipments and are eager to take profits. The prices of some cotton yarn varieties have fallen deeply.
“From a personal point of view, on the one hand, it is difficult for the Xinjiang cotton incident to have a fundamental impact on the overall demand for Xinjiang cotton. The impact is more on the price difference between domestic and foreign cotton. On the other hand, the global The overall economy is relatively optimistic, which is different from 2019. There is a high probability that global demand will not decrease as a whole, and it will be difficult to change the export demand for Chinese clothing in the short term.” He said that the market performance on Friday was more of an emotional release . Although the industry as a whole is still weak, we should not be too pessimistic.
The reporter learned that the May cotton contract has continued to fall and adjusted since hitting a high of 17,080 points on February 25. Coupled with the outbreak of the Xinjiang cotton incident in the past two days, this period has The panic has increased, the internal and external market has fallen in resonance, many people in the industry have great differences in their views on the market’s medium and long-term trends, the macro environment has been less favorable than expected in stages, and there have been some new changes in cotton supply and demand.
“The continuous correction of cotton prices after the year is the result of internal and external resonance. The expectation of a reduction in global cotton planting area in the new year has been disappointed, and the adjustment amount of production reduction is lower than expected. Xinjiang cotton planting intention has dropped from This is also the direct reason why the national cotton output in the new year has dropped lower than expected.” said Li Xiaowei, an analyst at Yide Futures.
He Meng said that in terms of fundamentals, the northern hemisphere is about to enter the spring sowing stage of new cotton, and weather issues in production areas in China and the United States will come into view. Last year, global cotton production decreased, and this year The recovery of the global cotton spinning industry is unstoppable, so cotton prices will enter the upward channel again sooner or later. However, the impact at the macro level cannot be underestimated at present, and the development of Sino-US and Sino-European relations requires investors to continue to pay attention.
“With the recurrence of the epidemic, concerns about exports, Sino-US relations, etc.Among the short-term macro news, substantial positive stimulus is needed for the external market to break through. In the short term, focus on the USDA new cotton intention planting area report released on the 31st of this month, and follow up on the weather in US cotton producing areas. “He Meng said.
In addition, it is worth noting that domestic cotton commercial stocks have been declining for many consecutive weeks. “During the new cotton sowing period, due to weather conditions, prices generally tend to rise but not fall. The cotton spinning industry continues to recover, consumption continues to be optimistic, and cotton prices will eventually return to the upward channel. He Meng said that in the short term, we still need to pay attention to the impact of macro factors outside the industry.
During the interview, the reporter learned that the biggest variable in the market at present is the change in unit yield caused by the weather.
“At present, Texas, the main US cotton-producing area, is still in drought. Pay attention to the changes in the abandonment rate in the United States in the later period, which is expected to be lower than the USDA’s estimate. Although the expectation of a significant reduction in area has been disappointed, the background for a large increase in output does not exist, there is not much pressure on new supply, and there are still weather variables, there is still room for output adjustment, and the pattern of destocking will continue. “In Li Xiaowei’s view, during the Spring Festival, textile companies accelerated their inventory replenishment before the Spring Festival, and demand recovered. Cotton industrial and commercial inventories continued to rise. They both turned downward in February, but they are still at historically high levels. The demand for downstream finished products continues to recover. Inventories of gray fabrics and yarns have remained at a low level, and the availability of substitutes polyester staple fiber and viscose staple fiber has been relatively high, and demand still exceeds supply. High inventories maintained by textile companies have also limited the short-term purchase demand for cotton, and short-term raw materials There is insufficient motivation to replenish stocks, but relatively strong downstream demand has strong support for cotton prices, and the support for the immediate demand in the market outlook is still there.
Li Xiaowei believes that the recovery of consumption will become the main support for the cotton market in the future And transaction themes, restorative rigid demand exists objectively, but the rhythm of destocking and whether internal and external demand can resonate will determine the rhythm of cotton price trends and where the future space is.
“Planning of planting area Finally, more variables on the supply side mainly come from changes in production caused by weather. In particular, changes in weather in the United States will become the main factor, and supply will maintain an overall loose pattern. Compared with production variables, there is more room to look forward to adjustments in demand, and the pace of destocking will continue, which is the basis for a positive trend in the future. “Li Xiaowei said that as for when demand will start, whether it will recover slowly or burst out with concentrated resonance, it still requires a lot of external cooperation.
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