This week, Zheng cotton began to stabilize and rebound after falling to a low of 16,505 yuan/ton, which was exactly the same as the rebound pattern of U.S. cotton. However, it encountered pressure when it rebounded to around 18,000 yuan/ton. Only by crossing this pressure point can Zheng cotton recover. There is the motivation to continue to rebound upward, otherwise it will remain in a turbulent state.
Whether cotton prices can continue to rise in the near future depends on downstream consumption. If consumption recovers as expected, Zheng Cotton will still have room to rise. Otherwise, when new cotton comes on the market, market pressure will only increase. What is the short-term downstream consumption like? The recent survey results are not optimistic. First of all, the downstream market is still not improving. The U.S. Xinjiang-related bill has taken effect. The traceability of cotton in orders exported to the United States has become stricter, and the consumption of new cotton has been suppressed to a certain extent. The current drop in cotton prices has intensified the decline in pure cotton yarn prices. Coupled with the sluggish demand in the domestic market, downstream wait-and-sees have increased significantly. Due to the scarcity of orders, pure cotton yarn companies are barely able to keep their operations open, with inventories further increasing and operating pressure increasing. The market is not expected to be optimistic in the short term.
As cotton prices fell, PTA and staple fiber prices also fell sharply, but spot prices remained strong. Last week, viscose staple fiber prices were basically around 15,500 yuan/ton. According to a survey by the China Cotton Association, the sharp decline in cotton and polyester staple fiber prices has affected the sentiment of the viscose market to a certain extent, and users’ wait-and-see mentality has increased. Due to high crude oil prices, short fiber production is unprofitable, sales are sluggish, and inventories are at high levels. Downstream fabric factories also reported fewer new orders and the domestic sales market continued to be sluggish.
Now that Zheng cotton has rebounded to the pressure level, the upward impulse can weaken, and short-term downstream consumption has not recovered significantly. The probability of cotton prices continuing to rise sharply is small, unless there is a significant bullish event.
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