As the global COVID-19 epidemic intensifies, cotton prices are refreshing their sense of existence by constantly hitting new lows. After falling sharply for several days, today the main contract of Zheng Cotton finally fell below the 10,000 yuan/ton mark. This One price has been significantly lower than the cost price of cotton. How deep is the room for decline in the future?
You may get some inspiration by referring to historical prices, but it may not make sense because history will definitely repeat itself, but The end result will never be repeated. The historical low of Zheng cotton is 9890 yuan/ton, and now it has reached a new low of 9935 yuan/ton, which is only one step away from the previous low. Does this mean that this round of cotton prices will hit a new low?
According to data from the National Cotton Market Monitoring System, the average processing price of 3128B grade Xinjiang cotton in 2016 was 13,150 yuan/ton, and the annual low at that time was 9,890 yuan/ton. There is a huge difference between the two. 3260 yuan/ton, a decrease of 24.8%. The average processing price of grade 3128B Xinjiang cotton in 2019 was 14,306 yuan/ton, and the current low price is 9,935 yuan/ton. The difference between the two is 4,101 yuan/ton, a drop of 28.7%, indicating that the decline this time has been greater than in 2016.
From the perspective of cotton supply and demand in the figure above, the fundamentals of cotton supply and demand in 2019 are better than those in 2016.
Of course there is also the influence of chemical fibers. Affected by the increase in production in international oil-producing countries this year, oil prices once fell to around US$20/barrel, and the prices of chemical fiber products have also continued to hit new lows. The price of chemical fiber, which is a substitute for cotton, has continued to fall, which is negative for cotton prices to a certain extent. At present, crude oil and PTA have shown signs of temporary stabilization, which is good for cotton.
Of course, the impact of this epidemic may be greater than the 2008 financial crisis. Judging from the current situation, all countries are strengthening and upgrading prevention and control measures. Although countries with severe epidemics are still far from the turning point of the epidemic, It took some time, but the epidemic situation is gradually stabilizing.
What is most worrying at the moment is the resonant downward trend in cotton and cotton yarn prices, which will do the greatest harm to the industry. The post-holiday cotton price reduction is much greater than that of cotton yarn, and according to the current trend, market demand may drop to a minimum in the next 1-2 months. The lack of orders and inventory accumulation may aggravate the cotton yarn price to make up for the fall. If the yarn price makes up for the fall, it will inevitably It will be transmitted to cotton prices to continue to fall.
Generally speaking, after cotton prices fall below 10,000 yuan/ton, the downward momentum will quickly weaken, and the depth of the decline will be limited. However, the possibility of new lows cannot be ruled out. Today’s market trend has already reflected this. The competition for the 10,000-yuan mark is fierce.
Although it is of little significance to conduct predictive analysis at this time, because no one can accurately predict the price, cotton has a cost after all, and it will inevitably reverse when the price reaches the extreme. The trajectory of cotton will be more intense and exciting in the future. </p
