That week (August 29-September 2, 2022), Zheng cotton maintained a volatile downward trend, and fell below the 10,000 mark in daily trading on Friday, with the lowest point once falling to 14,040 yuan/ton. This wave of decline was mainly due to the influence of foreign cotton. The sharp correction of US cotton caused Zheng cotton to lose support and follow the decline.
That week, under the sharp adjustment of US cotton, Zheng cotton could not survive alone. Due to the relatively weak domestic fundamentals, the fluctuation range of the market was weaker than that of the external market. After continuing to fluctuate near the Wanwu mark, Zheng Mian finally chose to break through downward, and the center of the shock continued to move downward. A very few companies in Xinjiang and the mainland have tried to open scales, and the opening price is basically 5.5-6.0 yuan/kg, reflecting the weakness of the cotton market in the new year.
That week, the domestic epidemic once again showed signs of spreading at multiple points, and some areas took silent measures to strengthen control, which had a certain impact on cotton consumption. Domestic power shortage areas are facing cooling and rainy weather. With the lifting of power restrictions, the operating rate of the cotton textile industry has rebounded, and consumption has rebounded to a certain extent, but the rebound is limited. In particular, the demand for medium and high-count yarns is less than expected, and raw material prices have fluctuated widely. , downstream companies still need to replenish their stocks, especially since the new season cotton will be picked soon, which will also put pressure on cotton prices.
1. Cotton output remains basically stable
According to statistics from the China Cotton Association, the country’s total cotton output in 2021 was 5.774 million tons, a year-on-year decrease of 2.5%, of which Xinjiang’s output was 5.272 million tons, accounting for approximately 91% of the country’s total output. Supported by higher purchase prices last year, my country’s cotton planting area will remain basically stable in 2022. According to a survey by the China Cotton Association, the national cotton planting area is 43.47 million acres, basically the same year-on-year, including 37.57 million acres in Xinjiang, a year-on-year increase of 2%. The national proportion further increased to 86.4%. The national unit yield is expected to increase slightly year-on-year, with the total output being approximately 5.92 million tons, a year-on-year increase of 2.5%. Among them, Xinjiang’s overall growth is better than last year, and the output is expected to be more optimistic. The total output is expected to be approximately 5.453 million tons, a year-on-year increase of 3.4%, accounting for the national total. 92.1% of production.
2. Consumption demand has declined, and cotton imports have decreased year-on-year.
Since 2021/22, the domestic textile market has been sluggish, and the substantial impact of restrictions on Xinjiang cotton has increased. Foreign trade orders have been outflowed, companies have insufficient operations, and purchasing intentions are sluggish. Domestic cotton consumption demand has fallen sharply. Coupled with the inversion of domestic and foreign cotton prices, imported cotton prices have an advantage. weakened, cotton imports fell accordingly. According to customs statistics, my country imported a total of 1.621 million tons of cotton in the first 11 months of 2021/22, a year-on-year decrease of 39.1%. Among the source countries, the United States ranks first, accounting for 56.0%; Brazil ranks second, accounting for 27.7%; India ranks third, accounting for 2.9%.
3. International cotton prices are relatively strong, and internal and external inversions last for a long time.
In 2021/22, domestic and foreign cotton prices first rose and then fell, but international cotton prices were relatively stronger, rising for a long time and with a large amplitude, and falling back more slowly. Since the inversion of domestic and foreign cotton prices in March 2022, it has continued until End of year. Domestic cotton spot prices continued to rise at the beginning of the year. The China Cotton Price Index (CCIndex3128B) hit the highest point in the past 10 years at 22,963 yuan/ton on February 15, 2022, and then began to gradually fall back; international spot prices did not rise until May. It peaked and fell back, with the Cotlook A index rising to a maximum of 173.45 cents/pound on May 5. The inversion of domestic and foreign cotton prices began on March 22, and continued to expand thereafter. The China Cotton Price Index (CCIndex3128B) was at a discount to the Cotlook A Index. The price difference between the 1% tariff reached a maximum of 6,574 yuan/ton on June 21, 2022, and then narrowed, returning to between 5,000-6,000 yuan at the end of the year.
On August 31, China’s cotton price index CCIndex (3128B) closed at 15,984 yuan/ton, a year-on-year decrease of 11.8%; the Cotlook A index closed at 130.6 cents/pound, a year-on-year increase of 25.9%. During this year’s acquisition period, the acquisition cost increased significantly due to reasons such as processing companies rushing to harvest. The cost of Xinjiang lint cotton was 23,000-25,000 yuan/ton, while futures and spot prices were always lower than this level. Cotton processing enterprises experienced cost inversions, and it was difficult for enterprises to pass Futures hedging has enabled sales at the same price, and the sales progress has been significantly slower than normal. Cotton companies are under great sales pressure.
4. The rotation of reserve cotton is carried out in an orderly manner
From October 8 to November 9, 2021, the first batch of central reserve cotton in 2021 was listed for a total of 646,500 tons, with a transaction volume of 395,600 tons, and a transaction rate of 61%; from November 10 to 30, the second batch of central reserve cotton was listed A total of 266,000 tons of cotton were listed, and 177,000 tons were traded, with a transaction rate of 67%.
The rotation of cotton reserves in 2022 will start on July 13, and the end time will be determined in a timely manner based on market conditions, rotation conditions, etc. Currently in progress. As of August 31, 2022, a total of 58,500 tons had been imported, with an average transaction price of 15,951 yuan/ton, of which the highest transaction price was 16,490 yuan/ton and the lowest transaction price was 15,658 yuan/ton.
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