Since May, domestic cotton prices have continued their upward trend in April. On May 24, the price of China’s 3128B grade lint cotton increased by more than 1,000 yuan from April 28, setting a new high for the year.
On the first day of June, cotton futures rose strongly again, even driving the collective rise of other bulk textile raw materials.
The main reason for the increase in cotton prices is the expected disturbance on the supply side. That is, since cotton entered the planting season, the global planting area has declined and bad weather has boosted production reduction expectations. At the same time, rising futures prices have led trading companies to actively increase spot prices. “Chen Caijuan, cotton market analyst at Zhuochuang Information, told reporters.
In addition, there is news in the market that a large number of companies are raiding goods. Huafang Cotton Yarn has been selling well recently, and Xinjiang Tianhong has been buying a lot of goods.
Chen Caijuan said that the cotton sown area has decreased this year, and since April, there have been repeated rainfalls and cooling weather in Xinjiang, the main producing area, which has led to the postponement of cotton sowing. In May, rain and snow weather once again occurred in most areas of Xinjiang, and cotton suffered from low temperature and freezing damage. “With the expected reduction in cotton planting area, abnormal weather has strengthened the market’s concerns about cotton production reduction and pushed up cotton prices.”
The downward transmission of cotton price increases is blocked, and the profits of cotton spinning companies are compressed to the break-even point
With the end of the industry’s traditional peak season, cotton yarn transactions overall slowed down in May. Except for a few varieties such as combed compact 60S, the price increase of cotton yarn was limited, and the price of gray cloth failed to follow the increase. Conventional gauze began to slowly accumulate inventory. The downward transmission of cotton price increases was blocked to a certain extent, and the profits of cotton spinning companies were compressed to the break-even point.
Textile enterprises in Xuzhou, Yancheng and other places in Jiangsu Province said that since mid-to-late May, except for a small amount of high-count yarn orders until late June, orders for other specifications of cotton yarn have generally weakened; currently, cotton yarn traders in Jiangsu, Zhejiang, Guangdong and other places have inventories Generally high, the willingness to replenish stocks in the short term is not high, and there is a possibility of selling goods, which is “making matters worse” for textile companies. Therefore, textile companies have just tentatively raised their ex-factory prices, but have to urgently call a halt. The probability of terminal fabric factories and traders lowering prices and paying for purchases increases.
In the pure polyester yarn market, driven by the sentiment of buying up rather than buying down, there are phased replenishment actions. However, the overall wait-and-see mood is strong. As of May 30, the average market price of pure polyester yarn in Shandong was 13,000 yuan/ton, down 100 yuan/ton from the beginning of the month and down 10.50% year-on-year. The export of pure polyester yarn continues to be under pressure, and domestic sales orders are also insufficient. The downstream market mainly needs to make up for it, and the wait-and-see sentiment is strong.
On the other hand, in May, downstream garment companies have entered the mid-year stocking period, and relevant orders have been placed one after another. Such orders generally have obvious requirements for delivery time. Therefore, some textile companies have successively started rush mode.
Since May, the operating rate of weaving enterprises in Jiangsu and Zhejiang has increased steadily. This week, the operating rate has stabilized at 75%, an increase of 0.5% from April. Local dyeing factories still maintain full capacity operation, with the current operating rate of 73.7%.
Prices of major textile raw materials may fall in resonance from June to July
Since the beginning of this year, the macro market has been weak externally but strong internally, and textile and apparel consumption has been cold externally but hot internally. As domestic cotton prices rise, the substitution effect of chemical fiber may begin to appear.
Judging from historical rules, the price differentiation of polyester staple fiber and cotton in the off-season is more likely to occur. Data from the past ten years show that from June to July, cotton prices fell more often than they rose, while polyester staple fiber prices rose more often.
From a fundamental perspective, as the demand off-season deepens, textile demand is expected to weaken seasonally from June to July. As the yarn link enters the inventory accumulation cycle, the prices of major textile raw materials will fall back in resonance, and corporate processing profits may be compressed.
In terms of raw materials, the supply of chemical fiber is relatively loose, which is bad for short fiber prices; cotton supply is expected to tighten. After the transaction, loose static supply and seasonal decline in demand will drive the market, and cotton prices will face high downward pressure. In the off-season, the cost center of various industrial chains of textile raw materials may resonate lower.
From the demand side, expectations for domestic consumption recovery still exist, but the foreign trade market performs poorly, and terminal demand is weak externally and strong internally, and the support for the cotton yarn market will gradually weaken. Domestically, with the arrival of the traditional off-season of high temperature and high humidity, new orders for conventional gauze in the downstream will gradually decrease. There is accumulation pressure on gauze, which may affect the procurement rhythm of cotton yarn in cloth factories. There is an expectation that downstream demand will weaken, which is bad for textile raw materials and various industries. Industry chain prices.
In terms of profits, the chemical fiber industry chain will be troubled by overcapacity, and processing profits will be difficult to turn around. The profits of the pure cotton series will also be compressed. However, with the support of production cuts and the expected rush for revenue by ginning companies, the decline in cotton prices in the off-season may be limited, and it will also be limited. Supporting the narrowing of the decline in cotton yarn prices, it is expected that the processing profits of cotton spinning companies may be compressed to near the break-even point.
To sum up, the economic cycles of China and the United States are misaligned, foreign trade demand continues to be weak, and domestic trade demand remains weak.�After the recovery, the off-season is ushered in. The dual cycle of the domestic and foreign markets is not operating smoothly, and the superimposed costs are declining. It is expected that the price resonance and downward pressure of the chemical fiber and pure cotton industry chains will increase from June to July. Among them, the inventory of the polyester staple fiber industry chain is relatively high, and the decline may be will lead.
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