According to feedback from cotton trading companies in Zhangjiagang, Shanghai, Qingdao and other places, affected by the sharp fluctuations in ICE cotton futures and Zheng cotton, the narrowing of domestic and foreign cotton price differences, and the delay in the replenishment of raw materials by domestic cotton textile companies, shipping schedules, Inquiries and transactions for bonded and customs-cleared foreign cotton are relatively weak. Transactions are concentrated in Indian cotton and Brazilian cotton, while shipments of US cotton, West African cotton, and Australian cotton are light, especially high-quality lint cotton.
Judging from the survey, cotton inventories in China’s major ports continue to rise (some bonded areas and transit warehouses are beginning to run out of storage capacity), coupled with the continuous decline in ICE cotton futures in the past two days (the main ICE contract on March 3 Breaking 90 cents/pound and approaching 88 cents/pound), traders’ basis quotations for customs clearance cotton have been slightly lowered, and the sentiment of bullishness and price support is still relatively strong.
A medium-sized cotton importer in Zhangjiagang said that market participants are paying close attention to the US$1.9 trillion economic stimulus package that will be discussed by the U.S. Senate this week. If there is positive news about the fiscal stimulus plan, the U.S. stock and commodity futures markets will Ushered in a strong rebound. In addition, the escalation of tensions in the Middle East and the intensification of the confrontation between NATO and Russia may trigger an increase in crude oil and natural gas prices.
Compared with the current shipments of Indian cotton and Brazilian cotton from ports, the performance of U.S. cotton is much inferior, especially high-quality lint cotton such as 31-3, 31-4, 41-3, and 41-4. The reasons can be summarized as follows:
First, the quotation of US cotton is “too high” and lacks competitiveness. Since late February, the price of US cotton 41-3 36/37 (strong 28GPT) for port customs clearance has been higher than that of M 1-5/32 Indian cotton at 800-1000 yuan/ton, higher than that of M 1-1/8 Brazilian cotton and inland warehouses. In 2020/21, the “Double 28” Xinjiang cotton price is 300-400 yuan/ton; secondly, the quota within the 1% tariff is tight, resulting in traders taking the initiative to clear customs and the quantity of high-quality US cotton is relatively small; thirdly, due to the first phase of the China-US trade agreement With continued implementation, a sharp decline in Brazilian cotton planting area and output in 2020, and limited growth in Australian cotton output, international cotton merchants and large import companies have a prominent selling mentality and are not in a hurry to “reduce the basis and destock” in the short term. Fourth, in 2020/21, the supply of American SJV Pima cotton, Egyptian Jiza cotton and Xinjiang long-staple cotton is not only tight, but also the quotation is significantly higher than that of fine-staple cotton. Some spinners purchase high-quality US cotton and Australian cotton to partially replace long-staple cotton. The probability of cotton increases. </p