According to statistics from the General Administration of Customs, my country’s cotton import volume in May 2022 was approximately 180,000 tons, showing a rebound trend month-on-month (cotton import volume in April 2022 was 173,200 tons). However, it is worth noting that throughout May, although the rising and falling trends of ICE futures and Zheng cotton prices were basically the same (with slight periodic deviations), the domestic and foreign cotton prices were not only severely inverted (under 1% tariff), but the price difference became wider and wider. , becoming more and more prominent. In theory, the competitiveness of Xinjiang cotton is already very prominent. As of now, the direct cost of US cotton 31-3/31-436/37 (strong 28GPT) in China’s main port after 1% tariff clearance is inverted with the 2021/22 Xinjiang cotton in the mainland warehouse, which is as high as 4,000-5,000 yuan/ton.
So which cotton textile companies continue to purchase and clear US cotton/Brazilian cotton/Australian cotton despite unfavorable factors such as the widening price difference between domestic and foreign cotton and the depreciation of the RMB exchange rate? Industry analysis mainly includes the following three types of companies:
First, companies that have received medium- and long-term orders from clothing brands/retailers exporting to the United States, Europe, etc. (the contract clearly stipulates that Xinjiang cotton is banned) must bite the bullet and hurry up in order to arrange orders, transport, deliver, and collect the balance in a timely manner. From the perspective of credibility and long-term cooperation, profits are placed in a secondary position.
Second, processing trade enterprises in coastal areas such as Guangdong, Jiangsu, Zhejiang, and Shandong purchase foreign cotton (logistics goods imports from special supervision areas and imported processing trade imports). Although the import volume statistics are listed, the orders and sales are not domestic.
Third, a small number of high-count and high-value-added order buyers specify “customized spinning” such as US cotton, Australian cotton or Brazilian cotton. Textile enterprises purchase/clear customs in small quantities and multiple batches, and buy as they are used. Since the second quarter of 2022, orders for high-count carded/combed yarn have continued to be weak and there is a shortage of orders. Spinners are no longer picky about short and small orders.
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