Since the New Year holiday, cotton imports in South Asia have been particularly active, and India has been very active in purchasing foreign cotton. On the one hand, yarn prices have strengthened (combed yarn has increased by 5-6%), and on the other hand, the supply of new cotton is insufficient.
It is understood that because U.S. cotton, Brazilian cotton and West African cotton are blocked in port shipments, “far water cannot quench the near thirst”, Bangladesh’s strong demand for Indian cotton has also helped to increase India’s domestic cotton prices, thereby increasing India’s demand for imported cotton. Demand has increased significantly.
At present, there is good demand for all major export varieties, and cotton merchants are willing to continue signing contracts, indicating that logistics and transportation problems are expected to be alleviated in the second quarter of this year.
Compared with South Asia, the import activity of Southeast Asian countries is slightly less active. Last week, the trading basis of high-grade West Africa for April loading was 1,425 points (May contract), and the Australian cotton SM for June-July loading was 1-5/ 32 The transaction basis is 1350 points (July contract), and the basis for the new flower in 2023 is 1250 points. Some combed yarn mills need to replenish raw material inventory for the April-May packaging period.
China is about to enter the Spring Festival holiday, and the stocks of major manufacturers are relatively sufficient. Currently, large trading companies mainly purchase Brazilian M 1-5/32 grade cotton for September-October loading period, with a basis difference of 1,300 points (December contract), and US green card cotton. 31-3-37, the basis is 1500 points (December contract), and it is required to arrive in Hong Kong before December 31, 2022. It is expected that China’s foreign cotton imports will become flat before the end of the Spring Festival holiday. In addition, some textile mills have reported receiving this year’s quota.
According to the current situation, the spot demand in the spot market is still a major support for the cotton market. Logistics problems continue to support the high premium of front-month contracts (short-term supply is tight, textile mills accept spot price increases), but U.S. cotton shipments may lag behind Put pressure on the later market. However, due to the huge number of unpriced ICE futures contracts, 120,000 as of the end of 2021, futures prices are expected to remain strong at least in the first half of this year.
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