As the prevention and control measures introduced by many countries and regions in response to the new coronavirus epidemic have impacted oil demand, and the existing production reduction agreement is about to expire at the end of the month, international Oil prices plummeted on March 18. On Wednesday, the price of West Texas Intermediate crude oil (WTI) futures for April delivery on the New York Mercantile Exchange fell by $6.58, or more than 24%, to close at $20.37 per barrel, a new low since February 20, 2002. The price of May Brent crude oil futures on London’s Intercontinental Exchange fell $3.85, or more than 13%, to close at $24.88 a barrel, the lowest closing price since May 8, 2003.
As the oil market was filled with smoke, U.S. stocks plummeted again overnight. The Dow Jones Industrial Average closed down more than 1,300 points, falling nearly 10,000 points from its February high, falling for the first time in the past three years. At 20,000 points, the Dow’s gains during Trump’s term were once zero. The S&P 500 index closed down more than 5%, triggering its fourth circuit breaker in ten days and the fifth circuit breaker in history. Previously, on March 9, March 12, and March 16, local time, the U.S. stock market had plummeted and circuit breaker three times in March.
According to Xinhua News Agency, the latest real-time statistics released by Johns Hopkins University in the United States show that as of 7:00 U.S. Eastern Time on the 18th (19:00 Beijing time on the 18th), the global The number of confirmed cases of COVID-19 has exceeded 200,000, reaching 201,436. The number of deaths reached 8,006 and the number of cured cases was 82,032. According to overseas reports, the number of confirmed cases of new coronavirus pneumonia outside China has exceeded 110,000. Academician Zhong Nanshan said that the current “epicenter” of the global epidemic is Europe.
Under the multiple crises, the cotton market has not been spared. On March 19, the main force of Zheng Cotton closed the price limit to 11,095 yuan/ton, setting a new low again, the third lowest since its listing in 2004, and the first low in history. On March 1, 2016, it reached 9,890 yuan/ton, the second lowest in history. The low was on November 12, 2008, to 10,080 yuan/ton. As of press time, the lowest quotation for ICE’s main contract was 55.20 cents/pound, which fell to a four-year low. As the largest consumer of U.S. cotton, Vietnam has also begun to be affected by the epidemic recently, and the market has intensified concerns about cotton consumption.
A trader said that no matter whether the price of cotton rises or falls recently, he will choose to purchase carefully. He originally thought that 12,000 yuan/ton was the price bottom, but he did not expect that it would be easily broken through in just a few days. Currently, some funds are not available. Don’t dare to buy the bottom easily. Pessimists believe that Zheng Cotton’s bottom-out journey may continue. Historically, the cotton price range has been in the range of 10,000-16,000 yuan/ton. According to the current Zheng Cotton’s bottomless falling method, it will fall below 11,000 yuan/ton in the short term. Yuan/ton is not impossible.
According to a recent follow-up survey by China Cotton Network, cotton-related trading companies generally reported that futures continued to fall and fell rapidly, and the spot price adjustment speed could not keep up. As soon as some customers placed orders, cotton prices dropped one after another, causing customers to continue to regret their orders. Repeatedly, customers simply stopped placing orders. Individual spinning companies said that according to usual experience, cotton is now at a low level. When the price fell below 12,000 yuan/ton, they bought a little at the bottom to replenish their stocks. But I didn’t expect that it would fall so sharply, and I would never buy the bottom again. Market buying interest has been hit, and cotton-related traders are even more miserable. Not only is it difficult to sell lint, prices continue to fall, and some companies have already lost money and resorted to pledging to survive.
In addition to the heavy blows suffered by cotton trading companies, cotton ginning companies are also hard to escape. Some companies that have not completed lint processing and sales before the Spring Festival are currently facing a dilemma. If the sale of the remaining lint is not completed as soon as possible, subsequent loan repayments will be a problem. If the sales are now not only a loss, but also unable to find a successor. Even if we wait and see, the storage fees, financial costs, etc. will all be borne by the processing companies for several months. Therefore, cotton prices continue to hit record lows, and the upstream and downstream cotton industries will have to face a major reshuffle.
CITIC Futures Wang Yan believes that the cotton market’s usual 7-8-year cycle of ups and downs may be broken. If there is a bottom in 2020, it may not appear in the first half of the year, but a periodic rise cannot be ruled out. The driving factor may be a retaliatory rebound in demand after the end of the domestic and foreign epidemics.
From an industry perspective, the latest USDA data shows that global cotton consumption is 25.73 million tons and global cotton production is 26.47 million tons; global cotton supply exceeds demand. Assuming that the foreign epidemic prevention and control cycles are similar to those in China, and the epidemic causes the world to lose 2 months of consumption, consumption will be reduced by approximately 4.29 million tons, exacerbating the global cotton oversupply situation, and the cotton inventory-to-consumption ratio will increase to 93.3%, second only to 2016 The annual inventory-to-consumption ratio reached an extreme value of 102% in a single month.
From a policy perspective, turn in turnDelays, suspensions, volume increases, volume reductions, etc. are all the most effective means to periodically reverse the supply and demand pattern of the circulation market. On March 17, at a press conference of the National Development and Reform Commission, Li Hui, deputy director of the General Affairs Department of the National Development and Reform Commission, said that while strengthening epidemic prevention and control, the next step is to restore normal production and living order in an orderly manner and strengthen the “six stability” “The measures focus on the combination of long-term and short-term, precise implementation of policies, and follow the trend to fully unleash the huge potential and strong momentum of my country’s development. “The policy tools our country has are still sufficient. We will closely monitor the economic situation, timely promote the introduction and implementation of relevant reserve policies based on the needs of the development of the situation, increase policy hedging, and strive to minimize the impact of the epidemic and complete the building of a moderately prosperous society in all respects.” Social goals and tasks.”
From a risk perspective, the current stock market, crude oil, the epidemic, etc. are all negative, but positives are also constantly brewing, such as locust plagues, abnormal weather, and low prices that suppress supply.
The increase in cotton prices requires production reduction as the most direct driver, either from shrinking area or lower yield. Therefore, from the perspective of suppressing supply, the low point in cotton prices may occur after the 2020 purchasing season. It has now entered a low price zone, short selling is risky, and long selling requires patience.
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