The U.S. government has long been hyping up Xinjiang-related issues. In September this year, news broke that the U.S. planned to issue a “Xinjiang cotton ban.” Now it is using the excuse of “forced labor” to increase its suppression of Xinjiang’s cotton industry.
On December 3, Foreign Ministry Spokesperson Hua Chunying hosted a regular press conference. A reporter asked about the U.S. ban on imports of Xinjiang cotton and cotton products on the grounds of “forced labor.”
Hua Chunying said that China has stated its solemn position on relevant issues before. Some politicians in the United States concocted false news about so-called “forced labor” in order to restrict and suppress relevant Chinese parties and enterprises and contain China’s development. The U.S.’s actions violate international trade rules, violate market economic principles, disrupt global industrial and supply chains, and damage the interests of companies and consumers in various countries, including the United States. It is a typical behavior that harms others but does not benefit itself.
On December 2, local time, the U.S. Customs and Border Protection (CBP) took action and announced that it had targeted Xinjiang cotton production giant, Xinjiang, which accounts for one-third of China’s output. The Production and Construction Corps issued a “ban” banning the import of cotton and cotton fabrics from this company. According to Reuters analysis, this move is one of the measures taken by the Trump administration to strengthen its tough stance against China in the last few weeks of its term, making it more difficult for President-elect Biden to ease Sino-US relations.
It is understood that the Xinjiang Production and Construction Corps’ cotton output accounts for one-third of China’s total cotton output, and it has been deeply integrated into China and even the world. in the supply chain. Some textile industry experts said that it is almost impossible to import textiles from China without the participation of the Xinjiang Production and Construction Corps.
What impact will the ban have on the cotton market?
Xiong Tao, an analyst at Bank of China International Futures, told a reporter from Futures Daily that there was news before the U.S. Xinjiang cotton ban because the U.S. presidential election has been put on hold. At present, the impact on cotton prices is no longer as great as before. However, in the medium to long term, this move will accelerate the transfer of the textile industry to Southeast Asia, and China will increase its purchase of foreign cotton.
“In the future, it is more likely that my country will reduce U.S. cotton imports and retaliate. U.S. cotton is currently under great pressure, and cotton and cotton yarn outside the United States will have a premium. Xinjiang cotton purchases this year The processing is coming to an end, and the purchase cost of seed cotton in the early stage is relatively high. Domestic and foreign consumption recovered rapidly after the epidemic, and the country started to rotate cotton from Xinjiang, which has certain support for cotton prices. In terms of specific operations, compared with most commodities, cotton prices have not increased as much. Big, the valuation is not high, and the probability of a sharp decline is low.” Xiong Tao added.
CITIC Futures Analyst Wu Xinyang also believes that this news has attracted market attention in mid-September. The sanctions at that time triggered a decline in the cotton market, and then came the news that the sanctions were shelved. Cotton prices rebounded. Judging from the feedback from the midstream and downstream cotton spinning industries, the market’s concerns about this have once again intensified. Coupled with the improved cost performance of imported yarns, the demand for imported yarns has also expanded recently, squeezing the market for Xinjiang cotton products to a certain extent. In terms of policy, the country also intends to protect Xinjiang cotton through purchase and storage policies. If sanctions are implemented or the scope of sanctions is expanded, the purchase and storage intensity is expected to increase. However, the current high price difference between domestic and foreign cotton has caused the purchase and storage mechanism to initiate circuit breaker measures, and there has been no progress in the purchase and storage activities that started on December 1.
Some market participants who did not want to be named said that the United States has restricted the use of Xinjiang cotton in imported textiles for some time, which has had a great impact on the market. It is reported that some large multinational companies have requested not to use Xinjiang cotton in their orders to avoid later uncertainties. This will inevitably have a negative impact on cotton consumption in Xinjiang, and this impact will not be eliminated in the short term. It is recommended that companies prepare for the response as soon as possible.
Looking ahead to the market outlook, Wu Xinyang said that cotton is currently mostly oscillating. New cotton cost support, the space below is limited. In addition, the pressure on warehouse receipts has not yet been released. Once the futures price is too high and the basis is appropriate, hedging pressure may appear. Coupled with the current decline in cotton textile prices, which has compressed profits, downstream acceptance of high cotton prices is temporarily limited. In the long term, the gradually improving macro picture has laid the foundation for the recovery of orders in the later period, and it is recommended to buy on dips.
“The panic buying of seed cotton in Xinjiang cotton has been particularly obvious this year, leading to high prices of seed cotton. At present, domestic cotton prices are high, and purchase and storage cannot be held as scheduled, which has also seriously damaged downstream textile enterprises. competitiveness. At present, downstream consumption has weakened, new cotton hedging pressure has increased, and there is greater pressure on the short-term market. However, we are not pessimistic about the long-term cotton price trend. It is recommended that processing companies take advantage of the trend to hedge, and textile companies can increase their investment in low prices. Buying volume.” said the above-mentioned market person. </p
