Entering mid-August, the cotton spinning industry is about to usher in the peak production and sales season of the “Golden Nine and Silver Ten”. Can consumption, which has been suppressed before, be significantly restored by taking advantage of this opportunity?
This year is really not easy for the cotton spinning industry. First, the epidemic broke out in Shanghai from April to May, which had a great impact on the national economy. Consumption was squeezed, and the operating rate of many cotton spinning companies fell to historical lows. In order to avoid losses, some companies even started to suspend production and take holidays. The peak production and marketing season in the first half of the year was lost due to the epidemic, and cotton consumption lagged significantly behind the same period last year.
In addition, as epidemics continue to emerge in other parts of the country and prevention and control measures continue to escalate, cotton consumption continues to be under pressure. According to the latest production and sales data, as of August 11, the national sales rate was 67.2%, a year-on-year decrease of 32.4 percentage points, and a decrease of 25.9 percentage points from the average of the past four years. Among them, Xinjiang sales were 64.5%, a year-on-year decrease of 35.1 percentage points, and a decrease of 25.9 percentage points from the past four years. The four-year average dropped by 27.9 percentage points.
At the end of June, the United States officially introduced a bill banning Xinjiang cotton, which resulted in a significant reduction in foreign trade orders in the U.S. and European markets, further suppressing the sales of Xinjiang cotton. The above comprehensive factors have had a great impact on Xinjiang cotton prices, which fell to the lowest point during the year. However, with the bullish impact of the US cotton report, Zheng Cotton began to rebound. In the short term, with the support of the surge in US cotton and the peak industrial consumption season, cotton prices are gradually recovering, downstream production and sales rates are steadily increasing, and market confidence has begun to rebound. According to Foshan cotton spinning people, the operating rate of local weaving factories has increased to more than 60%, while the operating rate in the early stage was only 20-30%.
According to data from the National Cotton Market Monitoring System, in early August 2022, the yarn production and sales rate of the sampled companies was 89.8%, an increase of 1.7 percentage points from the previous month; the production and sales rate of cloth was 85.5%, an increase of 2.5 percentage points from the previous month; the inventory was 57.7 days of sales. Volume decreased by 2.0 days month-on-month. It can be seen that the production and sales data in August are recovering, and the futures market is also digesting this bullish factor. In the short term, we must beware of the early realization of the bullish futures market and the cotton market falling sharply again.
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