Last week, the national reserve cotton rotation policy was officially finalized. According to the rotation announcement, from July 1 to September 30, 500,000 tons of cotton reserves are planned to be rotated out. The quantity of this round is basically within market expectations, and the bottom price of the round continues the previous pricing method. The reserve cotton rotation rules also stipulate that when the cotton spot price index in the domestic market is lower than 11,500 yuan/ton, trading will be suspended from the next working day, and the circuit breaker mechanism is introduced pioneeringly, eliminating the need to continue to sell reserves when market prices fall. The concerns brought to the industry also provided certain support for active market trading. Since the reserve cotton was released in the first week, the transaction rate has been maintained at 100% for several consecutive days. Moreover, the actual weighted average transaction price was 11,303 yuan/ton, and the average price increase was 864 yuan/ton, which is enough to show the enthusiasm of the market for bidding.
It is understood that the reserve cotton rotation can maintain a high transaction rate, first of all, because the resources in the rotation are mostly old cotton from 2012/13. Due to the actual long storage time, the color grade downgrade is obvious. However, indicators such as length, strength, and micronaire are relatively acceptable. For some companies that need to produce low-end yarns such as open-end spinning, the cost-effective reserve cotton market is the first choice. Some yarn mills also said that the specifications of some yarns are not high, and they can produce smoothly by purchasing some reserve cotton and mixing it with Xinjiang cotton and imported cotton in appropriate proportions. Therefore, the rotation of reserve cotton has solved the demand gap of some enterprises for low-end raw materials. At the same time, driven by low cost, the enthusiasm of spinning mills in production has increased. Stimulated by the amount of cotton allocated, the use of commercial cotton has also increased, improving Stimulated enthusiasm for buying and selling in the market.
Secondly, some cotton-related companies believe that the current domestic cotton price is in the historically low valuation range, and purchasing part of the cotton reserves as investment is also a channel to achieve long-term profits. Therefore, in addition to the active participation of textile companies, trading companies have also become more enthusiastic about entering the auction market recently.
At present, the demand side of the cotton market still needs to continue to recover. The rotation of cotton reserves not only enhances the competitiveness of domestic yarns, but also meets some market gaps without interfering with the normal operation of market prices. The continuous high transaction results are bound to provide a certain positive stimulus to the entire market and will help speed up the circulation of the domestic cotton market. </p
