Since mid-June 2022, domestic and foreign cotton futures prices have experienced an unprecedented sharp decline, and bonded cotton shipments have increased. However, the instability of the cotton market and the difficulty in export recovery have made it difficult for companies to expand purchases. According to data compiled by the National Cotton Market Monitoring System, as of mid-July, the foreign cotton inventory not cleared at the port was around 233,400 tons, a slight decrease from the previous month.
1. Expectations of economic recession stimulated a sharp decline in domestic and foreign cotton prices
In the past month, rising inflation in the United States has led to an expansion of the Federal Reserve’s interest rate hikes, and the U.S. dollar index has reached new highs. Expectations of economic recession have triggered a comprehensive sell-off in the commodity market. Coupled with expectations of declining cotton demand, ICE cotton futures have fallen sharply, with a cumulative decline of 30%. . At the same time, the general sell-off in the domestic commodity market and the Xinjiang cotton ban have put tremendous pressure on the domestic cotton market. Zheng cotton futures plummeted simultaneously, and the domestic and foreign markets jointly staged a high dive. As of mid-July, the domestic cotton B index and the international cotton index (M) under 1% tariff are still upside down by 5,000 yuan.
2. Cotton prices fell too sharply, and companies were reluctant to buy cotton.
The sharp drop in cotton prices has directly affected the normal procurement of textile companies, and the willingness to purchase cotton continues to be sluggish and more cautious. According to a survey by the National Cotton Market Monitoring System, as of early July, 42.4% of companies were preparing to purchase cotton, a month-on-month decrease of 18.8 percentage points, and a decrease of 21.5 percentage points from the average level of the same period in the past five years; 42.4% were holding a wait-and-see attitude, a month-on-month increase. 9.6 percentage points, an increase of 8.8 percentage points from the average level of the same period in the past five years; 15.2% of companies do not plan to purchase cotton, an increase of 9.2 percentage points from the previous month, and an increase of 12.7 percentage points from the average level of the same period in the past five years.
3. Textile enterprises purchase cautiously and inventory decreases slightly
The recent plunge in cotton prices has promoted the sales of bonded cotton to a certain extent. The inventory of most varieties in Qingdao Port has declined. However, due to excessive market fluctuations, textile companies are very cautious in purchasing, so the inventory decline is very limited. Inventories in Nantong Port decreased slightly, while inventories in Zhangjiagang increased. According to data from the National Cotton Market Monitoring System, as of mid-July, the statistics of uncleared foreign cotton bonded stocks at major ports are as follows:
Qingdao Port has 187,700 tons, compared with 196,000 tons in the same period last month, including 57,500 tons of Brazilian cotton, 10,500 tons of Indian cotton, 69,500 tons of American cotton, 4,200 tons of Australian cotton, 1,500 tons of Central Asian cotton, and 37,500 tons of West African cotton. tons, Mexico, Sudan, Israel, Egypt, Greece, etc. total about 7,000 tons.
Zhangjiagang produced 39,700 tons, compared with 32,000 tons last month, mainly American cotton, Brazilian cotton, Indian cotton and African cotton.
Nantong Port 0.6 thousand tons, 7 thousand tons last month, mainly American cotton, Brazilian cotton, Indian cotton and African cotton.
4. Later outlook
At present, the economic recession is expected to have an impact on the global textile industry. Textile export orders are still not optimistic. Domestic cotton consumption has dropped significantly. In addition, the cotton market has fluctuated violently. Enterprises’ willingness to buy cotton is sluggish. It is difficult to increase foreign cotton purchases and only maintain rigid demand purchases. Until economic concerns subside and the futures market returns to stability, foreign cotton spot purchases will continue to be pessimistic, and bonded cotton inventory digestion will remain slow.
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