The new year is approaching, and the performance of the cotton textile market this year is very different from previous years. Cotton prices rose sharply in October, making it difficult for the entire industry to transmit the increase to the end market. Against the background of repeated epidemics, domestic and foreign market consumption is still difficult to fully return to normal. The upstream and downstream production and sales of the textile industry have been affected by phases, and it is difficult for enterprises to steadily receive orders for production, resulting in the current dilemma of sluggish downstream demand and difficulty in reducing upstream costs.
In recent years, domestic cotton consumption has mostly remained at around 8 million tons, and output has been around 6 million tons. The gap between production and demand mainly relies on imports and surplus inventories. Especially in the past two years, textile companies’ demand for imported cotton has increased, and my country’s cotton import volume has increased significantly, which in turn led to the “explosion” of domestic imported cotton stocks. According to customs statistics, my country’s cotton imports reached 1.91 million tons from January to October 2021, a year-on-year increase of 19%. Among them, 1.55 million tons were imported in the first half of the year, with an average monthly import of 258,000 tons, close to 36.8% of the national average monthly consumption. However, due to factors such as tight import quotas in the early stage and demand from textile companies, the actual consumption of imported cotton is not consistent with the import rhythm, resulting in a backlog of inventory at ports. At the end of June, the inventory of imported cotton at the port climbed to more than 700,000 tons. After July, due to the sharp rise in domestic cotton prices, the window for imported cotton consumption was gradually opened, and the inventory continued to decline, currently down to about 200,000 tons.
At present, the pressure on imported cotton stocks has been eased, and short-term stocks are not expected to be replenished soon. Although cotton imports grew exponentially in the first half of this year, the situation has not improved since the import volume fell below 100,000 tons in August. This is not only related to the concentrated listing of new domestic cotton and the increase in short-term supply, but also to the high international shipping costs this year. According to relevant media reports, the load factor of routes from Shanghai to Europe and the United States has recently continued to remain close to the full load level, and freight rates are at a high level, with signs of continuing to rise. Data show that last week, the China Export Container Freight Index (CCFI, reflecting the settlement price of container shipping companies) remained unchanged month-on-month, while the Shanghai Export Container Index (SCFI, reflecting the booking prices of container shipping and freight forwarding companies) rose 2.7% month-on-month. Moreover, judging from feedback from some international cotton merchants, most import shipping dates are after February. Therefore, it is expected that imported cotton stocks may continue to decline before the Spring Festival, which will provide opportunities for domestic cotton consumption. Of course, if the downstream textile demand can fully recover in the future, the industry transmission will be smoother.
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