At present, foreign epidemics are showing an outbreak trend, market sentiment has plummeted, the global economic market is in the doldrums, and the prices of most commodities have plummeted. The author analyzes and summarizes opinions on recent cotton trends.
Data show that the current average domestic spot price is 11,850 yuan/ton, the 1% tariff cost of imported cotton is 11,516 yuan/ton, and the import profit calculated based on the 1% tariff cotton import cost is 334 yuan/ton. In terms of cotton yarn, the Chinese yarn price index (CY Index) C32S is 20,460 yuan/ton, and the port delivery price of imported cotton yarn (India C32S) is 20,540 yuan/ton. The above prices are all at lows in the past five years.
According to the March estimate of the United States Department of Agriculture, China’s cotton output is 5.933 million tons, imports are 1.796 million tons, and consumption is 7.947 million tons. The consumption level is roughly the same as in 2015/16. Affected by the overseas epidemic, cotton demand is still significantly reduced, and the pattern of supply exceeding demand is inevitable.
Domestically, judging from the breakdown of textile and apparel data in previous years, domestic consumption from January to March accounted for 26.88% of the total annual consumption (based on USDA’s estimated domestic consumption of 7.95 million tons, About 2.13 million tons). According to customs statistics, my country’s textile exports fell by 20% year-on-year from January to February 2020. Although export data for March have not been released yet, judging from market reflections, terminal consumption has now lost this prime time period from January to March. Some organizations estimate that if the overseas epidemic continues to spread into June, domestic consumption may decrease by more than 1 million tons this year.
The author believes that the lack of orders from the cotton textile industry is the leading factor. With the global outbreak of the COVID-19 epidemic in February, my country’s foreign trade exports and short- and medium-term orders have rapidly shrunk or even stopped. Domestic textile companies are facing pressure to reduce and suspend production after just resuming work and production. Second, the global economic environment is another major factor crushing cotton. Judging from the data released so far, the global epidemic is far from reaching an inflection point. At the same time, Russia and Saudi Arabia have been engaged in a crude oil price war. Crude oil prices continue to fall, and the global economic recovery is difficult. Third, prices continued to fall sharply, market buying suffered a heavy blow, and the continued spread of panic was also a key factor. When cotton fell below 12,000 yuan/ton, a large number of retail investors bought at the bottom, but then the price limit fell, and market buying suffered a heavy blow. Cotton traders are finding it difficult to sell their lint amid falling prices, and some companies have already lost money and resorted to pledging to survive. Fourth, cotton ginning enterprises will face loan repayment problems in the future, and the burden on enterprises will be relatively serious. Cotton prices continue to hit record lows, and the upstream and downstream cotton industries will have to face a major reshuffle.
What do you think of the bottom space? According to the current production resumption rate and import and export data of the domestic garment industry, it is inevitable that domestic cotton consumption data will be reduced by 1 million tons, and the supply and demand structure of cotton is more relaxed than in 2015/16. In 2015/16, it was 9890 There is a high probability that the historical low of yuan/ton can be exceeded. Despite this, we cannot ignore the factors that may usher in an inflection point. First, the overseas epidemic situation has reached an inflection point and the growth in the number of new people has slowed down; the enthusiasm of cotton farmers during the spring plowing season, weather and other supply-side factors cooperate with the hype.
From the perspective of domestic consumption, the textile and apparel market is both popular and timely. Clothing that was not sold due to the epidemic in the winter of 2019 will be carried forward to the winter of 2020. The epidemic is still spreading, spring clothing sales have been affected, and the increase in spring clothing inventory will indirectly affect autumn clothing consumption. Corporate cash flow is even more tight under the impact of the epidemic, and the industrial chain is interlocked, which will force the operations of cloth and yarn mills to deteriorate. .
In addition, the overseas epidemic continues to spread, and the impact on the global economy in the first half of the year is difficult to alleviate. Clothing export orders are greatly affected, and downstream textile companies are severely lacking in new orders. Domestic demand in spring consumption has been damaged, and external demand in spring and summer has been severely affected. Consumption will also be greatly affected, and it is difficult to improve in the short term. As the overseas epidemic continues, market confidence is insufficient. Until the epidemic is completely controlled and the economy recovers, the market will still face huge fluctuations. It is expected that cotton prices may fall further, and may have room to break through historical lows. </p
