In 2020, I am afraid that no industry will not face huge uncertainty due to the impact of the new coronavirus epidemic, and cotton, an important raw material for textiles, is no exception.
Since the first quarter of 2020, the prices of US cotton, Zheng cotton and Zheng cotton yarn have been plummeting. It has “exited” a double-digit cliff-like decline, and the current downward trend is still not optimistic. The fall in cotton prices is naturally related to the lack of demand from textile companies that are currently suffering from “chargebacks”. On the other hand, it is also transmitted to cotton farmers’ declining intention to plant cotton. The global cotton industry chain is shrouded in the haze of the COVID-19 epidemic. I don’t know why. It will clear up sometimes.
Supply side
When will the embarrassing inventory be moved?
Plenty of inventory but few transactions
Just like what we are currently experiencing in 2020 The domestic COVID-19 epidemic broke out in January and February of this year. Most domestic textile companies suspended work and production in response to the epidemic. In late February, companies began to resume work and production one after another, and by mid-March, production had basically resumed. However, foreign epidemics began to break out in mainland China from the end of February to March, from Asia, Japan, South Korea, and Iran to Europe and then to North America. Recently, South America and Africa have also begun to increase. It seems that a global epidemic outbreak is imminent.
Galaxy Futures Liu Qiannan told reporters: “Affected by the epidemic, cotton consumption expectations throughout the first quarter are poor. Since the first quarter, the main U.S. cotton contract has dropped from the highest point of 71.96 cents/pound. The lowest fell to 50.68 cents/pound, a drop of 30%; the main contract price of Zheng Cotton fell from the highest point of 14,450 yuan/ton to the lowest point of 10,570 yuan/ton, a drop of 27%; the main contract price of Zheng Cotton Yarn dropped from the highest point of 22,460 yuan / ton fell to the lowest point of 17,670 yuan / ton, a drop of 21.3%. In the first quarter, the cotton market experienced the outbreak of the new crown epidemic at home and abroad, experienced the locust plague speculation, experienced the plunge of crude oil, experienced the collapse of European and American stock markets, and cotton prices At the same time, the volatility has also increased significantly.”
It is reported that the current cotton commercial stocks are sufficient. The China Cotton Association Logistics Branch conducted a survey of 152 cotton delivery and supervision warehouses, social warehouses, bonded zone warehouses and processing enterprise warehouses in 18 provinces and cities across the country. The total national cotton commercial inventory at the end of February was approximately 4.9726 million tons, a decrease of 3.93% from the previous month. million tons, still 407,400 tons higher than the same period last year.
However, due to the impact of the COVID-19 epidemic in February, domestic cotton spot transactions basically stagnated. In late February, textile companies began to start operations one after another, but they still mainly consumed the textile companies’ own inventories.
Import demand has dropped significantly
Cotton reserves are still uncertain
In terms of imports, Liu Qiannan said: “Due to the impact of the epidemic, the import data of cotton has not yet been released. However, in our view, the current outbreak of foreign epidemics is expected to be very difficult to control. Second, The demand for cotton in the entire textile industry will be reduced in the quarter due to the impact of the foreign epidemic. At the same time, domestic cotton consumption will also be affected. Overall, the demand for imported cotton is expected to be significantly reduced.”
Another factor that cannot be ignored in terms of cotton supply is cotton reserves. As we all know, the cotton reserve rotation that started in December 2019 is the restart of temporary collection and storage in six years. It is intended to strengthen the management of central cotton reserves, further optimize the reserve structure, and improve the quality of reserves. In this regard, Liu Qiannan said: “From December 2, 2019, the cotton reserve was rolled in to March 31, which lasted 4 months. The planned purchase volume of this cotton reserve was 786,000 tons, and the actual total transaction volume was 371,600 tons, accounting for 47% of the planned purchase volume. Judging from the total transaction volume of reserve cotton, the introduction of more than 300,000 tons of reserve cotton has little impact on the market. However, the current domestic cotton price has plummeted, and many companies are operating at a loss. In the country Taking into account the overall situation of stabilization, it is not ruled out that the country will continue to import cotton in the future in order to alleviate the pressure on enterprises, thereby supporting cotton prices.”
The intention to plant cotton has declined and spring plowing has been carried out in an orderly manner
The drop in cotton prices will directly lead to a decline in the intention to plant cotton. At the end of February 2020, the China Cotton Association conducted the third survey on the cotton planting intention area in 2020 among a total of 2,425 designated farmers in 12 provinces and cities in the mainland and the Xinjiang Autonomous Region. The results showed that the national cotton planting intention area in 2020 was 45.7357 million acres. , a year-on-year decrease of 5.03%. The Yangtze River Basin is greatly affected by the epidemic, and there are many factors affecting the cotton planting area, especially in Hubei Province. According to incomplete statistics, the intended area for cotton planting in the basin is 4.4491 million acres, a year-on-year decrease of 9.93% and a month-on-month increase of 4.6 percentage points. Among them, the intention to plant cotton in Hubei Province decreased by 14.53%.
While everything seems to be pessimistic, the effective control of the domestic epidemic in China has enabled the current spring plowing to be carried out in an orderly manner, and this has also become a key factor in the current cotton market. A heart-warming medicine. Liu Qiannan said: “As the temperature gradually rises, most areas across the country have resumed work and production, and spring sowing preparations are moving forward in an orderly manner. Among them, although spring plowing and spring sowing in Xinjiang cotton areas have been delayed, the overall preparations are in order, and southern Xinjiang cotton The district has unified arrangements and guidance for spring irrigation in the district, and preparations for plowing in northern Xinjiang are also moving forward. Agricultural production in the Yellow River Basin has basically resumed, farmers can go to the farmland to work, and it is more convenient to purchase agricultural inputs. Spring plowing and sowing preparations are being carried out in an orderly manner.”
Demand side
Terminal transmission is worrying both domestically and internationally
As a textile raw material, currently The insufficient start-up of textile enterprises directly affects the demand of the entire cotton market. Liu Qiannan said: “Affected by the domestic epidemic in January and February, the average start-up of textile enterprises was delayed by about a month, and many enterprises also had insufficient operating rates at the beginning of the start-up. Therefore, it is expected that the direct impact of the domestic epidemic on cotton consumption will be about one to one and a half months. With the outbreak of the international epidemic in March, export orders began to be affected. It is difficult to control the foreign epidemic in a short time. We predict that export orders will not be very good throughout the second quarter, and this will have a great impact on the consumption of end-use textiles and clothing. big. “
In addition, Liu Qiannan also said: “This epidemic will have a very big impact on the global economy. The global GDP growth rate is expected to decline, and the magnitude of the decline will be It will be determined by the overseas epidemic control situation. The decline in global economic growth will also put great pressure on textiles and apparel, which have greater consumption elasticity. ”
According to the latest statistics from the General Administration of Customs of China, from January to February 2020, China’s textile and apparel exports were US$29.835 billion, a year-on-year decrease of 20.0%. Among them, textiles ( The export value of textile yarns, fabrics and products) was US$13.773 billion, a year-on-year decrease of 19.9%; the export value of clothing (including clothing and clothing accessories) was US$16.062 billion, a year-on-year decrease of 20.0%. Liu Qiannan said: “This epidemic is expected to have an impact on Terminal consumption will have a very large impact on both domestic demand and exports. The impact on domestic demand is mainly in the first quarter, and the impact on foreign exports is mainly in the second quarter. ”
The weakening of end-use textile consumption is bound to be directly transmitted to upstream raw materials. It is reported that the prices of polyester staple fiber and viscose staple fiber have continued to be low recently, and the price of viscose staple fiber has dropped to 9,300 yuan. / ton, the price of polyester staple fiber has also fallen to a low of around 5,800 yuan / ton. The prices of these two chemical fibers have basically been lows since 2004. The continued low prices of chemical alternative fibers also reflect the current Downstream demand is not good.
In terms of international demand, Liu Qiannan said: “USDA’s March report showed a slight increase in global cotton production and a decrease in global cotton consumption, including a decrease in China. The magnitude is relatively large, resulting in an increase in global cotton ending stocks and an increase in the inventory-to-consumption ratio. Considering the global epidemic outbreak in March and April, it is expected that USDA will continue to reduce global cotton consumption in the future, resulting in continued increase in global cotton ending stocks. “Liu Qiannan estimates that global consumption will be reduced by 2 to 3 million tons in the future.
Finally, as a futures analyst, from an operational perspective, Liu Qiannan said: ” Whether it is the international market or the domestic market, the entire cotton price trend will be closely related to the development of the global epidemic. From an investment perspective, although the prices of U.S. cotton and Zheng cotton are at relatively low historical levels due to the epidemic, it is expected that farmers will have low intentions to plant cotton, which may lead to a reduction in global cotton production. The investment value of cotton will gradually become more prominent. But the main premise for this is that the global epidemic is basically under control. The current market may be facing a major crisis that will only occur once in decades. It is not recommended to rush into the market at this moment. You need to wait for the negative and panic sentiment to be further released before considering investing. ”</p
