Since the fourth quarter of 2020, the development of the cotton textile industry has exceeded expectations. Especially for ring spinning enterprises, yarn sales have been in short supply. Both price and quantity are significantly better than the same period in the past few years. The cotton textile situation continues to improve, mainly because the domestic epidemic has been well controlled, while cotton spinning companies in neighboring countries such as India and Vietnam have suspended operations and production, and orders have returned, resulting in a prosperous situation for domestic cotton spinning.
Behind this phenomenon, yarn prices have risen, quantity has surged, cotton spinning production capacity has expanded, and cotton prices have risen, causing cotton business units and ginning mill acquisitions to be in a dilemma: on the one hand, building ginning mills and renting ginning mills Flower factories require costs. If you don’t use them, you will lose money. If you use them, there will be a risk of price decline in the future. On the other hand, the processing capacity of the cotton gins in the main production areas of Xinjiang is double the local cotton production, so there is an incentive to rush to harvest cotton. A low purchase price means that you cannot receive cotton, and a high price means that if you cannot sell at the same price in the future, you will lose money. This year, there has been a situation where the purchase price is too high and cannot be sold at the same price.
Similarly, the textile market is not optimistic. Now most of the products are backlogged in downstream companies, and the delivery to the terminal is not smooth. According to industry statistics, only in Foshan, Guangdong, there is a static inventory of 500,000 tons of cotton yarn. This phenomenon also occurs in other places. Later, it will be passed on to cotton spinning enterprises, putting pressure on the cotton market.
The development of the cotton textile market in 2021 has the following situations: First, high price information is transmitted as soon as new cotton is opened. In the later period, the purchase price of lint is generally higher than 22,000 yuan, and some purchase costs exceed 25,000 yuan per ton. Second, after nearly a year of booming, the cotton textile market has experienced poor delivery since September, and yarn is partially stored in traders and downstream production links. Third, due to the recovery of the cotton textile market, new production capacity is under construction. According to statistics from relevant sources, there are 4 million tablets in total. Fourth, the market has become differentiated, with spot and futures prices inverted. Fifth, cotton storage transactions were positive, and the market showed strong demand. On December 1, relevant departments stopped the cotton storage rotation.
The price difference between domestic and foreign cotton is too large, and the price advantage of imported cotton yarn is highlighted. The market of domestic cotton textile enterprises is bound to shrink. So how to use the issuance of cotton import quotas to achieve stability in the cotton market and thereby promote the health of the cotton spinning industry chain is a subject that the imported cotton management department needs to carefully study and judge.
The issuance and use of cotton import quotas is very important to my country’s textile industry. At this stage, it is reflected in the fact that domestic cotton cannot meet production needs. Quantitatively, domestic cotton production is insufficient to meet demand. In terms of quality, some grades of domestically produced cotton cannot meet the demand for high-count yarns and cotton, and need to be supplemented by imports. Relaxing the quantitative restrictions on import quotas is the general trend and an objective need of the market economy.
It is recommended that on the basis of the cotton supply and demand balance account, the imported cotton quota should be implemented with excess supply. Increase the supply of cotton import quotas. This year’s situation is special, and the cotton gap will be relatively large. The reason is that the imported cotton yarn market has been squeezed due to the epidemic in Vietnam and India. In recent years, my country has imported about 2 million tons of cotton yarn every year. The epidemic will lead to a reduction in the resources of imported cotton yarn, thereby expanding the contradiction between domestic cotton production demand. This will be an uncertain market phenomenon in the longer term. It raises new topics for domestic cotton market regulation. To resolve this difficult contradiction, a better solution is to limit the quantity restrictions on cotton import quotas.
It is recommended that dynamic and unlimited quantity be issued in the issuance of cotton import quotas. An application system is implemented for quota issuance, which can avoid price fluctuations in the international market due to centralized issuance. Quota issuance can be bound to the domestic price index. When the domestic and foreign cotton price index reaches a certain difference indicator, the quota issuance will take effect immediately. The overall quantity and distribution objects are dynamically controlled.
It is recommended to improve the quota issuance rhythm. Timely delivery of quota control information during the cotton control window period encourages market parties to treat cotton acquisition and procurement rationally. Especially during the annual cotton replacement period, both domestic and international markets must be coordinated in a timely manner to avoid market turbulence caused by periodic policy lags. We can also consider implementing differentiated management of imported cotton quotas by import location. Relaxing the import quantity does not mean that imports can be made at will. Differentiated management of importing countries can be implemented according to needs, and reciprocal import and export can also be implemented according to market demand.
In short, improving the cotton import mechanism and liberalizing the cotton import quota does not mean relaxing cotton regulation. On the contrary, according to the operating characteristics and laws of the domestic cotton market, timely introduction of corresponding measures to ensure the stability of cotton production is an important step in realizing the realization of the domestic cotton market. An important guarantee for orderly development.
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