In the past week, transactions in the international spot market have remained flat. The sharp decline in ICE futures and frequent reductions in spot quotations have hit the confidence of textile mills.
In addition to the huge purchasing risk when prices fall, a practical problem is that downstream buyers’ psychological price for yarn has also dropped significantly, causing yarn quotations to fall along with cotton prices. At this time, the yarn market is already under pressure from rising inventories and slow retail orders.
Global inflation and economic recession have had a great impact on the textile industry. In the early stage, due to concerns about logistics issues, textile mills in various countries apparently over-purchased a large amount of high-priced cotton. However, these high-priced cottons will not arrive until at least one month after the signing of the contract. With the current cotton price falling sharply, the arrival of these high-priced cottons is very untimely. .
Due to insufficient yarn orders, textile mills have reduced their operating rates, and it will take longer to digest these high-priced cotton. In other words, the inventory of textile mills is now more abundant than previously expected and can be used for a longer period of time. And since raw material prices are too high and yarn prices have fallen, spinning this cotton is obviously a loss. Textile mills in various countries hope that prices will stabilize as soon as possible so that they can arrange yarn production according to relatively reliable market prices, slowly digest inventory, and overcome the current difficulties.
At present, cotton merchants are very worried about whether the high-priced cotton purchase contracts in the early stage can be smoothly executed, especially because the factories may ask to postpone the shipment or simply cancel the contract and renegotiate. At present, the spot price of cotton has dropped by about US$200 per bale compared with April to June. If contracts are canceled in large numbers, the blow to cotton merchants will be huge. Judging from the situation in recent weeks, the number of US cotton contract breaches is not large, ranging from a few thousand bales to more than 10,000 bales per week. There has been no large-scale breach of contract, which can be regarded as a relatively positive factor in the current market.
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