As the Spring Festival approaches, the activity of the cotton market continues to decline. Textile companies are shutting down for holidays, and cotton purchases and sales are shrinking, causing Zheng Cotton to experience a weak and volatile market before the festival. However, contrary to market expectations, a long Yang line in Zheng Cotton broke the calm atmosphere yesterday, and today it once again approached the previous high of 15,610 yuan/ton. Both the industrial market and investment groups launched a fierce debate on this hike in the market.
Due to the arrival of the Spring Festival holiday, many textile companies began to settle their accounts at the end of the year and stopped purchasing raw cotton. Logistics in many places were suspended one after another. The market enthusiasm for buying and selling was greatly reduced. In addition, US cotton futures fell below 80 cents/ pounds, once again hitting the confidence of bulls. Since late January, Zheng Cotton’s main CF2105 contract has fallen below the key support of 15,500 yuan/ton, and has weakly fluctuated to around 14,750 yuan/ton. As a result, many industry players have withdrawn from the market and waited, believing that weak prices before the holiday are inevitable.
In the ICAC report just released recently, global cotton production was reduced by nearly 9%, and global cotton trade is expected to increase in 2021 to 9.3 million tons. In addition, previous US Department of Agriculture global cotton supply and demand reports have also continued to reduce cotton production and inventories. Therefore, industry players are still optimistic about the global report to be released next Tuesday and have high expectations.
In addition to the stimulation brought by the improvement of the global supply and demand pattern, the news last week that the United States will suspend tariffs on nearly 370 billion US dollars of Chinese goods has also boosted the confidence of domestic participants. In addition, the prices of chemical fiber textile raw materials such as PTA and staple fiber continue to rise, which has also laid the foundation for the rise of Zheng cotton. Therefore, the upward trend in Zheng cotton is not only a reflection of the improvement in the supply and demand structure, but also the result of stimulation by good news. It is recommended that industry players view the market rationally, grasp the rhythm steadily, and adjust strategies in a timely manner to avoid risks caused by high volatility. </p
