On June 24, the intraday low of Zheng cotton fell to 17,000 yuan/ton, and the losses of ginning companies expanded rapidly. Not only did most cotton companies in Xinjiang not offer external quotations (including some cotton merchants), but domestic cotton spinning mills also suspended downstream quotations. According to the quotations from cloth factories and middlemen, cotton and yarn are all in a state of “available at low prices”. Only a few traders/futures companies with high hedging rates and large cotton inventories still insist on basis quotations, stimulating textile companies to replenish their inventories.
A medium-sized cotton spinning mill in Anhui said that the company signed a contract to purchase about 1,500 tons of Xinjiang cotton at a basic price in mid-June (it has been shipped by rail from the supervision warehouse in Xinjiang). At present, it seems that not only is it not buying the bottom, but it is buying “the waist”. The cost of raw materials is at a disadvantage compared to other surrounding companies. Downstream weaving and fabric customers were affected by the sharp drop in cotton futures. Not only did the cotton yarn purchase contracts signed in May and June encounter difficulties in execution, but new orders were calculated based on the current cotton price. Not only did they significantly reduce prices, but they also required sales. We accept payment methods such as 1-3 month account period, acceptance or payment on credit.
According to reports from small and medium-sized cotton spinning mills in Henan, Hebei, Jiangsu and other places, the stocking rate of cotton yarn has increased again in the past half month, and it is becoming more and more difficult to “destock”. However, inquiries about cotton yarn produced using imported cotton (especially American cotton) , the sales situation is relatively good. In order to avoid risks, some small textile companies that have stopped working in Guangdong, Jiangsu and Zhejiang plan to restart production before and after new cotton is launched. This is mainly due to various reasons such as the disconnect between domestic and foreign demand market orders, product accumulation, tight capital chains, and the Xinjiang cotton ban in Europe and the United States. maintain production. According to industry analysis, high raw material prices and epidemic restrictions are only superficial phenomena. The cliff-like decline in demand for cotton yarn since the second quarter of 2022 is the key to the problem.
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