Zheng cotton futures prices remained strong and volatile this week. Last night, the main CF2109 contract once again rose to 15,500 yuan/ton, while Zheng cotton yarn futures also moved up simultaneously, with the main force hitting a high of 22,975 yuan/ton. Recently, the mentality of all parties in the market has eased, and futures prices have stabilized and rebounded, which may help accelerate the production and sales of spot floral yarn.
First of all, Zheng cotton prices surged to 17,000 yuan/ton in the early stage and then fell sharply. It was difficult for downstream textile companies to balance the profit fluctuations caused by changes in raw material costs in a short period of time, and companies slowed down the price of raw cotton. The purchasing frequency has resulted in spot purchases and sales having been tepid since April. However, with the recent reduction in fluctuations of Zheng cotton and Zheng cotton yarn, the profit margins of textile companies have gradually stabilized, and the willingness and pace of product destocking have also accelerated. Some textile companies in Henan, Jiangsu and other places reported that the rebound in cotton yarn and cotton cloth inventories has eased, and the frequency of inquiry and purchase of cotton has increased significantly compared with the beginning of the month.
Secondly, road and railway freight rates out of Xinjiang have dropped, and some cotton-related manufacturers and middlemen have moved to the mainland to increase the amount of Xinjiang cotton. At the same time, some companies use packaging discounts, basis reduction and other methods to attract textile enterprises to purchase, which will accelerate the consumption of cotton stocks in Xinjiang. The fragmented mainland consumer market has diluted the pressure brought by high commercial inventories, and has also continued to prompt some investors to register cotton warehouse receipts for hedging and arbitrage. As of April 19, Zheng Cotton had 18,519 warehouse receipts, an increase of 48 from the previous day, and the effective forecast volume was 5,577, an increase of 4 from the previous trading day; the total volume of warehouse receipts and effective forecasts totaled 1.036 million tons.
Furthermore, as the middle of the year approaches, some companies are under increasing pressure to repay loans and have an urgent need for cash. The pressure to destock in time before entering the textile off-season is increasing. In the current relatively stable market environment, reducing the inventory of finished products is a prelude for some downstream companies to start a rainy day plan, speed up buying and selling operations, and achieve peace of mind. </p
