Recently, the cotton market has started a small downward trend. In fact, not only cotton, but also commodity prices have been falling recently. By analyzing the trends of each commodity, we can see that commodities began to rise for a long time starting in April 2020. At that time, after the outbreak of the new crown epidemic, various monetary easing policies in Europe and the United States stimulated the economy, and global commodity prices were priced in US dollars. The United States’ aggressive money printing has led to an increase in global commodity prices. Cotton prices have also risen sharply. The main price of U.S. cotton futures has risen from about 48 cents/pound in April 2020 to a maximum of 95 cents/pound. It is currently 85 cents/pound, which is still 77% higher than the lowest point. Domestic The price of Zheng cotton has also risen from a low of 9,935 yuan/ton in April 2020 to a maximum of 17,080 yuan/ton. It is currently 15,500 yuan/ton, an increase of 56% from the lowest point.
The rise in cotton prices is of course supported by its fundamental factors, such as the recovery of the global economy and the improvement of downstream demand, but the overall trend of the commodity , we believe that the current rise in commodities is mainly caused by the release of water in the United States. If this rise in prices is due to the release of water in the United States, then when the United States is expected to tighten monetary policy, commodities will basically bottom out. At the Federal Reserve meeting last Thursday, the Federal Reserve announced that interest rates would remain unchanged, but expectations for monetary tightening by the Federal Reserve after the meeting are increasing. Although there seems to be no expectation for the U.S. to raise interest rates this year, we can clearly see from the changing trends that expectations for monetary tightening are increasing, and the CPI is not expected to come down in the short term, and the U.S. economic recovery seems to be on track. If it proceeds sequentially, monetary tightening may accelerate in the future.
The global cotton inventory-to-consumption ratio has dropped significantly
But it is still at a relatively high level
According to USDA’s latest supply and demand monthly report, global cotton production in 2021/22 was 25.881 million tons, consumption was 26.679 million tons, ending inventory was 19.443 million tons, and the global cotton inventory-to-consumption ratio dropped to 72.88% , the cotton inventory-to-consumption ratio began to decline after reaching a high of 95% in 2019. The inventory-to-consumption ratio is expected to drop to 73% in 2021/22. The decline in the global cotton inventory-to-consumption ratio is often accompanied by an increase in cotton prices. From 2009 to 2010, the inventory-to-consumption ratio dropped to about 40%, and cotton prices rose sharply. In previous years, the inventory-to-consumption ratio of cotton in normal years was between 50% and 60%. Although the current inventory-to-consumption ratio of 73% is declining significantly, it is still high compared with previous years. The inventory-to-consumption ratio dropped from 95% to 73% and from 55% to about 40%. The supply feeling in the cotton market is very different.
The contradiction between domestic cotton supply and demand is not big
But the market driving force is weak
In the domestic cotton market, the supply is relatively sufficient. There are a large amount of industrial and commercial stocks of cotton + a large amount of imported cotton. The domestic demand on the demand side is acceptable, and the external demand data is also very good. In addition, Inventories of textile and apparel intermediate and terminal products are still at a low level. Overall, although the fundamentals are strong, the driving force is weak. The supply side is relatively sufficient. Testing data shows that the national cotton commercial inventory at the end of May was 3.5779 million tons, a year-on-year decrease of 195,900 tons. During the same period, the cotton industrial inventory of textile companies in the warehouse was 86.24 tons, a year-on-year increase of 182,900 tons. Judging from the total industrial and commercial inventories, , cotton stocks changed little last year, except that the stocks were transferred from traders to textile mills. At the same time, cotton imports have increased significantly. In 2021, my country has imported a total of 1.37 million tons of cotton, a year-on-year increase of 71%. Since 2020/21 (2020.9-2021.5), a total of 2.34 million tons of cotton have been imported, a year-on-year increase of 93%. In addition, there is a high probability that it will be possible in July. Turn out the reserve cotton.
In terms of consumption, domestic demand and exports are in good shape, and the inventory level of intermediate products is low. According to data from the National Bureau of Statistics, as of May, the cumulative retail sales of clothing, shoes, hats, and knitwear were 556.8 billion yuan, a year-on-year increase of 39.1%. According to the latest customs data, the cumulative exports of textiles and clothing from January to May 2021 were US$112.68 billion, a year-on-year increase of 17.3%, of which clothing exports were US$56.61 billion, a year-on-year increase of 48.3%.
In terms of inventory, gauze inventory is currently low, and cotton yarn profits continue to be high. The survey results show that the yarn inventory of textile enterprises decreased in May. The current yarn inventory of textile enterprises is 8.12 days. A decrease of 1.93 days from the previous month, and the inventory of gray fabrics was 15.42 days, a decrease of 1.36 days from the previous month.
Although consumption is good, we also need to see that the prices of cotton substitute fibers and cotton yarn substitutes have dropped significantly recently. The price of polyester staple fiber has dropped from 7,800 yuan/ tons dropped to the current 6,800 yuan/ton, a decrease of 13%. During the same period, the price of viscose staple fiber dropped from 15,700 yuan/ton to 12,300 yuan/ton, a decrease of 22%. The price of carded cotton yarn C32S dropped from 26,130 yuan/ton in early March. to the current 25,190 yuan/ton, a decrease of 3.6%; during the same period, the price of pure polyester yarn T32S dropped from 13,300 yuan/ton to 11,735 yuan/ton, a decrease of 12% during the same period; the price of viscose yarn R30S dropped from 19,200 yuan/ton to 16,600 yuan/ton tons, a decrease of 13.5% over the same period.
The off-season is coming
Yarn production The situation is better than that of downstream weaving
Recently, the China Cotton Textile Industry Association conducted a survey to understand the market operation of the cotton textile industry cluster. The overall operation of the surveyed cluster enterprises is stable, and the market may enter a stable period. No significant changes are expected in the short term.
According to Pure cotton yarn cluster enterprises reported that the recent operation has been basically stable, with the opening rate close to 100%. Since the beginning of June, cotton raw material prices have been generally stable, and yarn prices have not fluctuated significantly. At present, the market has entered the traditional off-season. The order situation of medium and high-count yarns is better than that of low-count yarns, and there is a small amount of inventory of products. The market is expected to maintain its current status in the short term.
According to the viscose yarn cluster enterprises, the current production is basically stable, and the price of viscose staple fiber raw materials has been basically stable recently. The willingness of enterprises to purchase raw materials is weak, and most of them buy as they are used. Recently, the price of viscose yarn has been basically stable along with the price of raw materials, and the product inventory is basically about one month. It is expected that there will be no significant changes in the market in the short term.
According to reports from colored spinning cluster enterprises, the colored spinning market still maintains a good trend and production is basically at full capacity. Orders are relatively sufficient, production and sales are relatively smooth, and product prices are basically stable. Some companies that are running well have already scheduled orders until August and September. The market is expected to maintain a good momentum in the short term.
According to reports from white gray fabric cluster enterprises, production is currently normal and the operating rate is close to 100%. Recently, the market as a whole has entered the traditional off-season, with slower shipments and product inventories lasting about one month, putting greater pressure on profits. The order situation of knitted fabrics is better than that of woven fabrics. The market is expected to maintain this trend in the short term.
According to the reflections of yarn-dyed fabric cluster enterprises, the overall market has been weak recently, the current production is basically normal, and the operating rate has dropped compared with the previous period. The characteristics of the off-season appear, with insufficient orders, slowed production and sales, and increased product inventory. There was no significant improvement in export orders. Enterprises have a strong wait-and-see attitude towards the market outlook.
According to reports from denim cluster enterprises, the current operation is basically normal, the market as a whole remains weak, and the overall opening rate has declined slightly. Recently, Guangdong has been affected by the epidemic, with poor upstream and downstream connections and insufficient orders. The current epidemic has been significantly controlled, and companies are cautiously optimistic about the market outlook. </p
