The “gold three and silver four” performance of the textile and clothing industry is “late start and early closing”. Not only will foreign trade export orders continue to be cold in the second quarter of 2023, but the domestic demand market is also characterized by “strong expectations and weak reality”. However, cotton prices at home and abroad have performed well recently! On April 6, international cotton prices rose nearly 3%, with ICE cotton prices rising to a maximum of 83.43 cents/pound. Zheng Cotton followed the rise in the external market. Today, the main contract of Zheng Cotton has completed the month change, and the new main 09 contract is gradually approaching the 15,000 mark, setting a new one-month high! So the question is, what causes Zheng Mian’s continued rise? How will the market outlook develop?
Performance of the gold, three, silver and four markets
It’s not as serious as rumors in the industry
Recent trends of Zheng Cotton’s main contracts
Overnight, No. 2 cotton on the U.S. ICE Exchange once again showed a rapid strengthening trend. No. 2 cotton rose as high as 83.43 cents/pound, up nearly 3%. Zheng Mian followed the rise in the external market. Today, Zheng Cotton’s main intraday contract completed the month change, and the new main 09 contract gradually approached the 15,000 mark, setting a new one-month high.
The atmosphere of Zheng cotton was weaker than the external market, but the overall trend was still strengthening simultaneously. Most domestic commodity futures closed higher today, with the main cotton contract closing at 14,680 yuan/ton, up 280 yuan, or 1.94%.
In addition to the disruption to the market atmosphere caused by the replenishment of US cotton positions, the recovery of domestic fundamentals has also injected a “boost” into the industry to a certain extent.
The current operating rate of cotton spinning mills is flat month-on-month, and overall is at the upper edge of the historical range for the same period. Due to the early decline in cotton prices, raw material inventories increased last week, while finished product inventories were still at the lower edge of the same period. In terms of exports, data from the General Administration of Customs showed that textile and clothing exports from January to February were US$40.84 billion, down 18.6% year-on-year. However, according to data released by the National Bureau of Statistics, from January to February 2023, the total retail sales of consumer goods was 7,706.7 billion yuan, a year-on-year increase of 3.5%. Among them, clothing, shoes, hats, needles, and textiles increased by 5.4% year-on-year, which was higher than the growth rate of the entire social category. The current situation rumored in the industry that “the peak seasons for gold, silver, and silver start late and close early” is actually not as severe as previously expected.
Caused by unwarranted U.S. sanctions
The pattern of “internally weak and externally strong” has not yet changed
Although cotton is currently showing a clear upward trend, it should be noted that the “internally weak and externally strong” pattern caused by unwarranted US sanctions has not yet changed.
When Xinjiang cotton sanctions were first implemented in the early days, my country’s cotton and textile industry used Southeast Asia as a transit point for raw materials/semi-finished products, made them into finished products, and then OEMed and sold them around the world. Although it has increased transportation costs, this move has largely maintained the stability of cotton production and sales.
Unfortunately, the United States has intensified its sanctions and extended its reach to Southeast Asia. Some international companies have been forced to redirect orders in order to avoid being jointly sanctioned. This is also due to the lack of textile foreign trade orders, and the rise of Zheng cotton cannot keep up with international cotton. The core reason for the price.
Low count yarn “reduce quantity and price”
Medium and high count yarns “increase in quantity and price”
According to feedback from several cotton textile companies in Henan, Hebei, Shandong and other places, since late March, inquiries and shipments of high-count cotton yarns such as 50S and 60S have been relatively smooth, but the transactions of OE yarns and ring spinning yarns have slowed down compared with February and March. The momentum is obvious, especially the demand for conventional C32S carded yarn is low.
A yarn mill in Zhengzhou, Henan said that in the past half month, the company’s C50S and C60S cotton yarn ex-factory prices have been increased by 500-700 yuan/ton in two times. At present, the inventory of high-count yarn is still relatively tight, and some weaving factories, middlemen, etc. There is a phenomenon of old customers placing orders and paying in advance. The quotations of low-count open-end spinning yarn and carded yarn with C32S and above counts are somewhat weak. Since last weekend, the quotations have been reduced by 100-200 yuan/ton as a whole, and there are prominent signs of product differentiation.
Judging from the survey, recent new orders for C21-C40S knitted yarn in the Guangdong, Jiangsu and Zhejiang markets have gradually weakened compared with the first and middle of March. The poor sales of open-end cotton yarn in the light textile markets of Shandong, Hebei and other places were mainly affected by the peaking and falling domestic demand for denim, labor protection supplies and denim orders.
A large-scale enterprise in Jiangsu said that based on the current inventory cost of raw materials, the profit performance of yarn mills is good. Although the operating rate can still be maintained at 80-90%, the main problem is that orders can only be supported until late April. Insufficient medium and long-term orders have caused enterpriseI feel anxious and my confidence is slow to recover.
Where will the cotton price outlook go?
Looking forward to the market outlook, in the short term, as US cotton continues to be strong, domestic cotton prices may continue to rebound, and Zheng cotton is expected to remain strong in the short term. However, the domestic demand peak season is coming to an end and entering the “Silver Fourth” period, the demand side will weaken. In the case of large short-term increases, there is a certain possibility of a correction for Zheng Cotton. In the medium to long term, domestic cotton planting area is expected to decrease this year. With the introduction of various policies to stabilize growth, the economy will continue to improve in the future, forming support at the bottom of cotton prices.
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