Since the beginning of this year, due to the relatively large fluctuations in the price difference of cotton spinning, chemical fiber substitution has been repeatedly mentioned. At the beginning of this year, due to the rise of cotton, the price difference of cotton spinning reached a new high. Due to the high price difference and the deterioration of profits of pure cotton yarn mills, the substitution of chemical fiber has accelerated, and some textile companies have On the basis of obtaining the consent of customers, the company adjusts the cotton-polyester ratio, increases the amount of polyester staple fiber and viscose staple fiber, and reduces the proportion of cotton. Facing the pressure of high costs, downstream companies are also willing to reduce costs by reducing raw material expenditures.
Since mid-June, led by the decline in cotton prices, cotton spinning price differentials have returned relatively quickly. As of now, the price difference between cotton and polyester has narrowed to about 8,700 yuan/ton, which is more than 6,000 yuan/ton narrower than the previous period. The price difference between cotton and viscose has narrowed to about 1,200 yuan/ton, which is more than 8,500 yuan/ton compared with the previous peak. At present, the price difference between cotton and polyester is still at a historically high level, while the price difference between cotton and viscose has fallen back to a low range. So after the price difference narrows, will there be a counter-substitution effect of cotton on chemical fiber? It seems unlikely at the moment.
First of all, although the price advantage over chemical fibers has increased after the sharp fall in cotton prices, companies are pursuing more stability in production and operations. The short-term decline in cotton prices has made companies more panic and worried about cotton. When Zheng cotton fell to 17,000 yuan/ton, the price point transaction volume was large. Some companies thought it had bottomed out, but after the price point, Zheng cotton continued to Falling below 16,000, 15,000, or even 14,000 yuan/ton, the price of cotton quickly formed a loss. The bottom is hard to find. Textile companies are worried that cotton prices will continue to fall, so they would rather purchase chemical fiber raw materials with less price fluctuations to avoid large losses in raw materials.
Secondly, the inventory of finished products in spinning mills is at a high level, and yarn prices have plummeted along with cotton prices. Spinners are facing huge financial pressure and finished product pressure. Moreover, with the continuous decline in the downstream, confidence has dropped to the extreme, and the operating rate has also remained low. For example, the operating rate of circular knitting machines in Foshan, Guangdong is about 20%, and the operating rate of circular knitting machines in Shaoxing has dropped to 30-40%. The demand for yarns Demand has decreased, making transactions difficult, and the market’s trading volume is close to exhaustion. At present, whether it is cotton spinning companies or chemical fiber companies, on the one hand, they are first faced with the problem of destocking. On the other hand, there is a lack of orders, and there are many shutdowns of work and production. Under the influence of downstream negative feedback transmission, textile enterprises are weak in their willingness to replenish their inventory, and they purchase small amounts as they are used. The substitution effect is not obvious under low liquidity.
The third is that after the Xinjiang cotton ban came into effect, domestic cotton spinning orders were strictly traceable, and pure cotton orders were mostly transferred to Southeast Asia, while chemical fiber orders were relatively less affected. Looking at my country’s exports to the United States, the United States imported a total of 2.885 billion square meters of textiles and clothing from China in May 2022, a year-on-year increase of 0.86%, but the imported cotton products were 366 million square meters, a year-on-year decrease of 6.84%. China is still the largest importer of U.S. textiles and apparel, but the largest importer of cotton products has changed hands to India. And with the Xinjiang cotton ban in effect for a long time, the trend of cotton spinning orders shifting outwards remains unchanged. Therefore, the advantage of cotton spinning demand brought by the narrowing of chemical fiber price difference is limited, and the substitution trend of chemical fiber for cotton remains unchanged.
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