Introduction: Affected by public health events at home and abroad, the downstream demand for cotton yarn has been suppressed, coupled with the huge shock in the financial market, domestic and foreign cotton prices have fallen. Under the dual suppression of poor demand and a sharp drop in raw materials, cotton yarn prices have been relatively strong recently. It may fall sharply.
Affected by the recent black swan incident, the cotton yarn market transactions have fallen again. Textile people said, “This year’s life is really difficult. As long as you can survive this year, you will be the winner.” It is true that since the outbreak of the public health incident in China, the cotton yarn market has been put on pause. Due to delays in starting work, some orders have been transferred externally. With the slow start of the textile market in mid-to-late February, the market has slowly recovered. However, a public health incident broke out abroad around March, triggering a sharp drop in the financial market. The sharp drop in raw materials coupled with a sharp drop in orders made the cotton yarn market transactions deteriorate again. Some companies reported that the impact of the public health incident was greater than the Sino-US trade war. 3 and 4 The traditional peak season of January will become the most difficult time to endure. Specifically:
Short-term orders plummeted
According to research, Sino-US trade relations improved before the holiday, and some foreign trade orders returned. Cotton spinning companies placed orders for about 15 days, and some companies placed orders for about 1 month. However, the domestic public health incidents around the Spring Festival caused a delay of 7-30 days in the start of production of textile companies after the holiday, and some orders were transferred externally. With the full resumption of production by textile companies at the end of February, orders began to improve. However, due to foreign public health emergencies since March, demand for textiles has been suppressed again. Some companies have reported that foreign trade orders have dropped sharply recently, and domestic trade orders have also experienced refunds. Judging from the situation of some large textile companies surveyed, some companies reported that 5,000 tons of large customers were lost, mainly due to cancellations by foreign fabric customers.
Cotton prices plummeted
Recently, the trend of Zheng cotton futures has been separated from the industry in stages, and has broken down following market news. Among them, the main ICE contract fell below 60 cents/pound, and the main Zheng cotton contract fell below the 12,000 yuan/ton integer mark, hitting a four-year low. At present, Zheng Mian is mainly affected by macro factors, including the escalation of foreign public health incidents and the plunge of foreign stock markets. Affected by the sharp drop in Zheng cotton, the spot price followed suit. It is understood that as of March 17, the closing price of Zheng Cotton’s main 2005 contract was 11,560 yuan/ton, the average spot price of China’s 3128B grade lint cotton (metric weight) was 12,419.3 yuan/ton, and the main cotton futures basis was 859.3 yuan/ton. The current basis gap continues to widen.
As the basis difference continues to widen, textile companies are bargaining for low prices, and procurement costs have dropped by more than 1,000 yuan/ton compared with before the holiday. According to research, on March 9, some cotton spinning companies boldly raised prices to purchase cotton near the limit of 12,100 yuan/ton. However, on the 13th, Zheng Cotton dropped to the limit again. Cotton spinning companies mostly held their currency and waited. Only a few textile companies and trading companies were at the limit of 11,690 yuan. / ton near the listed price transaction. It is understood that the current public transaction price of 3128 machine-picked cotton in northern Xinjiang is 12,200-12,500 yuan/ton, and the 2005 contract price basis is 600-800 yuan/ton, which is nearly 1,500-1,800 yuan/ton lower than before the Spring Festival, a decrease of 10%. above.
Inventory pressure is gradually increasing
Affected by the sharp drop in raw material prices and reduced orders, cotton yarn has begun to be unsalable, and market transactions have been priced but not available. This week, some textile companies reported that the current market problem is not price, but a lack of volume and no customers asking for prices. The same is true for the Zhongda Textile Business District, which has just opened. The mall, which originally had an average of tens of thousands of passengers per day, is completely empty. Spring and summer orders have basically been missed. The unarrived and sold finished products have been converted into inventory, which has been transmitted to the upstream. Shandong cotton spinning enterprises have cotton yarn inventories. It has been accumulated for more than one month, and the inventory of some companies that started production late has also reached more than 20 days. In the case of light demand, spot transactions of cotton yarn follow the market, and companies do not have strong awareness of raising prices.
With unsalable finished products, tight funds, and continued decline in raw material prices, cotton spinning companies began to pick cotton as needed. It is understood that due to the continued unilateral decline in cotton since June 2018, some textile companies have changed their cotton procurement strategy to picking as needed and strictly controlling cotton inventory. Before the Spring Festival, due to the improvement of Sino-US trade relations, some textile companies actively stocked cotton to a high of about 45 days. However, after the holiday, cotton prices plummeted, and overlapping orders were less than expected. Textile companies once again resumed the pick-as-you-go model. Currently, cotton spinning companies in Shandong have Inventory available for about 40 days. Small and medium-sized cotton spinning companies strictly control cotton inventory to 25-40 days, and the market has a strong wait-and-see atmosphere.
The price of cotton yarn fluctuated and fell, and the price/performance ratio decreased
Affected recently by poor orders, raw material price cuts, and rapid inventory accumulation, some cotton yarn varieties with high inventory have opened up.The initial profit margin is 100-500 yuan/ton, and the prices of some varieties with lower stocks are still relatively strong. Compared with varieties such as rayon yarn that continue to fall, the cost performance of pure cotton yarn is lower. It is understood that Sino-US trade relations improved in October 2019, and cotton prices continued to fluctuate and rise. Since late December 2019, cotton yarn has bucked the trend and has risen by 1,000 yuan/ton. This price has continued until after the Spring Festival, and some cotton spinning companies even made up for the increase after the holiday. . Looking at alternative varieties, the prices of rayon yarn and polyester-cotton yarn have continued to fluctuate and fall since September 2018. In March, the price of rayon yarn continued to fall by 700 yuan/ton, while the price of cotton yarn dropped by only 100-200 yuan/ton. As the price of substitutes has dropped significantly, some companies intend to adjust the yarn ratio, and the price of pure cotton yarn will be under downward pressure in the later period.
To sum up, in the short term, foreign public health events are still in the outbreak period, foreign trade orders are suppressed, new orders for cotton yarn are not good, and cotton yarn inventory has accumulated to 1 For more than a month, the price of superimposed raw materials has dropped by 1,500 yuan/ton, and the support of cotton yarn has weakened. With the rapid accumulation of inventory, the price of cotton yarn may fall sharply, and some varieties with tight supply may be more resilient. In the short term, it is recommended that cotton yarn varieties with larger stocks be available on the market as the market goes, and profits can be appropriately discounted when transactions are completed; prices of varieties with lower stocks can be temporarily stabilized, and the principles of production to order, picking as needed, and strict inventory control are adhered to. </p
