Recently, the latest data from the U.S. Department of Labor showed that the U.S. non-seasonally adjusted CPI rose by 8.6% year-on-year in May, setting a new record in more than 40 years. Inflation has hit a new high, making market investors worried that the Federal Reserve may adopt a more aggressive strategy of raising interest rates and shrinking its balance sheet. This intensifies concerns that the U.S. economy will fall into recession.
Affected by this, the U.S. stock market and European stock market fell sharply across the board, and the entire market was wailing. In sharp contrast, domestic and foreign cotton prices were relatively resistant to falling. Among them, the main ICE contract rebounded slightly when it fell to around 120 cents/pound. Although The price center of gravity continues to trend downward, but the decline is significantly smaller than that of other bulk commodities. Zheng Cotton’s performance was not to be outdone. After hitting a low of 20,030 yuan/ton yesterday, it quickly rebounded to above 20,300 yuan/ton. However, judging from the K-line technical form, this round of rebound is highly limited.
From the fundamentals of the cotton spinning industry, the current supply and demand sides do not support the strong rebound of cotton prices. First, the supply side is sufficient, cotton inventories continue to remain high, and sales progress has not accelerated significantly; secondly, downstream consumption is weak. According to the latest China Cotton Industry Inventory Survey Report, as of early June 2022, the average cotton inventory usage days of sampled enterprises was approximately 28.1 days (including the amount of cotton imported to Hong Kong), an increase of 1.3 days month-on-month and a decrease of 13.9 days year-on-year. The national cotton industry inventory is approximately 619,000 tons, an increase of 2.3% month-on-month and a year-on-year decrease of 35.1%.
Now that we have entered the off-season for the market, as the epidemic is under control, the production and sales ratio of enterprises has improved, but it is still lower than the same period last year. The China Cotton Industry Inventory Survey Report shows that as of early June 2022, the yarn production and sales rate of the sampled enterprises was 88.5%, an increase of 1.2 percentage points month-on-month, and a year-on-year decrease of 6.6 percentage points; the inventory was 33 days of sales, an increase of 2.0 days month-on-month, and a year-on-year decrease of 6.6 percentage points. An increase of 21.2 days; the production and sales rate of cloth was 82.7%, an increase of 3.6 percentage points month-on-month, and a year-on-year decrease of 2.3 percentage points; the inventory was 51 days of sales, an increase of 2.8 days month-on-month, and an increase of 12.4 days year-on-year. In summary, under the dual pressure of high raw material inventories and weak terminal consumption, the short-term rebound in cotton prices will face strong pressure of 21,000 yuan/ton.
</p
