According to feedback from cotton trading companies in Qingdao, Zhangjiagang and other places, inquiries and shipments of bonded, customs-cleared Australian cotton at ports have been relatively deserted since early September, which is in stark contrast to the continued activity of Brazilian cotton, Indian cotton, and American cotton. In contrast, Australian cotton export companies and international cotton merchants are still very supportive of prices and do not intend to actively lower the basis in exchange for a rebound in trading volume.
Industry analysis shows that on the one hand, the Australian cotton output in 2020 is only about 134,000 tons, and most of it has been contracted and purchased by the Chinese branches or offices of international cotton traders. Almost all Australian cotton has entered the circulation link. , with strong ability to withstand price fluctuations and risks; on the other hand, the U.S. Treasury Department will impose sanctions on the Xinjiang Production and Construction Corps next month, and cotton traders believe that the opportunities for Australian cotton to enter the Chinese market have increased significantly. It is reported that global fashion retailers and buyers are currently racing to track the source of cotton before the September 30 deadline and require their suppliers not to use cotton, yarn or textiles from Xinjiang; furthermore, in August/September Inquiries and orders for Australian cotton in 2020 from yarn mills and traders in Vietnam, Indonesia, India and other countries have bottomed out, bolstering their confidence in international cotton merchants and Australian cotton-related companies.
From the quotations of Qingdao Port traders, the basis difference of October/November shipping date SM 1-5/32 Australian cotton (strong 29GPT) and December shipping date SM 1-3/16 are respectively 16.5-17.5 cents/pound, 21.5-22 cents/pound (quoted ICE2012 + basis), which have remained stable for more than two consecutive weeks; because the basis difference is significantly higher than US cotton, Brazilian cotton, Uzbek cotton, etc., and Chinese cotton textile mills/ There are relatively few actual orders from intermediaries. Even if ICE futures fluctuate by 1-2 cents/pound, most international cotton merchants and Australian cotton export companies do not adjust their quotations. Waiting and waiting is the common mentality of cotton companies. On September 7-8, Qingdao Port/Zhangjiagang’s quotations for SM 1-5/32 and SM 1-3/16 in 2019/20 were 14,400-14,600 yuan/ton and 14,800-14,950 yuan/ton (net weight settlement), respectively. The quotations for Brazilian cotton M 38 and US cotton 31-3 37 are 1300-1500 yuan/ton and 800-1000 yuan/ton.
In addition to the high basis difference restricting Chinese companies from purchasing Australian cotton, what are the short-term short-term disadvantages? The industry summarizes the following three points: First, due to the sharp decline in China’s export orders to some developed countries such as the United States and Australia in the first half of the year, the proportion of foreign retailers and brands designated to use Australian cotton has dropped significantly. According to statistics, in the first half of 2020, the quantity and value of clothing imported by the United States from China dropped by 38.2% and 49% respectively; second, in addition to high-quality Australian cotton such as 1-3/16 or even 1-7/32, other grades, High-quality Australian cotton has been completely replaced by cost-effective Brazilian cotton or American cotton; third, China-Australia relations continue to deteriorate and have hit rock bottom. After the COVID-19 epidemic collapsed in the United States, Australia knew that the United States had framed China and followed closely behind it. It continued to smear my country and tried to bring the black hat of the “source of the virus” to my country. After repeated attempts to dissuade China failed, my country There are some restrictions on the import of barley, beef and wine originating from Australia. The trend of China-Australia relations is inevitably related to whether Australian cotton is accepted by Chinese companies. </p
