Since mid-March, various regions have lowered their epidemic response mechanisms, fully lifted road restrictions, and the flow of people has increased rapidly. The government has actively introduced measures to help enterprises resume work and production policies. According to statistics from the China Textile Association, as of mid-March, the resumption rate of large and medium-sized cotton textile companies has reached more than 80% (higher in coastal areas such as Jiangsu, Zhejiang, and Shandong), while the resumption rate of small spinning mills and weaving companies has generally reached 40% -50% (the production resumption rate is still relatively low due to the impact of the epidemic, personnel, market environment and order status). In the past half month or so, various cotton-using enterprises have started restocking raw materials, and some textile enterprises and traders’ purchasing personnel have also set out to enter Xinjiang. The entire cotton, cotton textile and clothing market is recovering in an orderly, orderly and controlled manner. So how should textile companies that have cotton demand from March to April replenish their stocks? The author’s views are as follows:
First, continue to increase the intensity of point-price purchasing. We mainly receive cost-effective Xinjiang cotton resources from traders (especially Zheng cotton warehouse receipts from mainland warehouses). At present, the global peak of the COVID-19 epidemic has not yet arrived, and it is difficult to determine the winner in the short-term struggle between Saudi Arabia and Russia. As a result, it is difficult to stop the decline in crude oil prices and China’s domestic and foreign textile and clothing markets have been severely squeezed (hopes that the epidemic will end in the summer are basically (disrupted), so the bottom of Zheng Cotton is still difficult to determine. Although point-price purchasing cannot guarantee buying at the bottom, it is at a relatively low level, which will help textile companies reduce costs and risks.
The second is to consider purchasing bonded and customs-cleared foreign cotton with better port quality indicators. Affected by ICE falling below 59 cents/pound, US cotton ME 51-4 (length 38-39, strength 29-30) was quoted at 65.5-65.9 cents/pound on March 17. The import cost under 1% tariff is 11,300-11,400 yuan/ton (net weight). In 2019/20, Brazilian cotton M 1-1/8 is quoted at 68.4-68.6 cents/pound, and the import cost under 1% tariff is 11,800-11,900 yuan/ton (net weight). Compared with Xinjiang cotton, the price and quality are not at a disadvantage.
Third, enterprises spinning medium and low-count yarns can receive warehouse receipts for 2018/19. Considering that the warehouse receipts for 2018/19 will be canceled in March, the epidemic has caused a significant decline in cotton consumption, the competition for new cotton in 2019/20 and the expectation of a large amount of market-based purchases of US cotton, traders have rushed to clear the 2018/19 old cotton. The price reduction and profit margin are relatively large, and it is suitable for yarn mills spinning 50S and below to receive goods.
The fourth is to look for opportunities in the supervision warehouses of Xinjiang’s main cotton-producing areas. Although the warehouses in Xinjiang are currently “overcrowded with cotton,” the spot market is deserted, and sales have basically stagnated, causing sellers’ expectations to fall again and again. Some cotton processing companies in Xinjiang are facing greater pressure to repay loans, and short-term price reduction sales cannot be ruled out. Regarding the possibility of payment, textile enterprises refer to traders’ basis for procurement (cash has more advantages). </p