According to foreign media reports, the U.S. authorities are expected to take effect on June 21 and impose an import ban on goods from China’s Xinjiang region in accordance with the Act.
In December 2021, US President Biden signed the Uyghur Forced Labor Prevention Act (UFLPA) to prevent Xinjiang goods from flowing into the US market. The “Prevention of Forced Uyghur Labor Act” includes a system with the core concept of “rebuttable presumption”, which means that unless certified by the U.S. authorities as being free of forced labor, all products manufactured in Xinjiang will be presumed to have used forced labor and Import prohibited. The “Law on the Prevention of Forced Uyghur Labor” clearly states that the “rebuttable presumption” clause will officially take effect on June 21, 180 days after the promulgation of the bill.
The Acting Executive Director of the U.S. Customs and Border Protection’s “Prevention of Forced Uyghur Labor Act” Enforcement Task Force said that Customs has currently increased the corresponding budget for the implementation of the act and is preparing to implement it on June 21. The executive director said that the threshold for importers to obtain forced labor-free certification is very high, and they need to provide clear and convincing evidence to prove that the entire supply chain of imported goods does not contain forced labor components, and any forced labor-free certification must Approved by the Commissioner of Customs and reported to Congress. If the relevant evidence provided is found to be fraudulent, U.S. Customs and Border Protection will impose corresponding penalties on the importer. In addition, the executive director said that importers can choose to transfer suspected prohibited related goods back to the country of origin.
Starting from June 2022, the U.S. Customs will strengthen inspections of cotton products imported from China. Regardless of the trade terms (LDP/FOB/CIF, etc.), the customs can directly seize the goods. Due to disagreements at the top levels and the risk of being attacked by Republicans for being “soft on China,” the Biden administration will still create obstacles to Chinese imports.
The U.S. government’s ban not only has a certain impact on my country’s cotton spinning industry, but also puts the U.S. domestic textile industry at great risk. U.S. retailer Dillard’s Co. said the U.S. government’s “temporary order” will affect the global supply chain, including the company’s cotton-containing products. Legislation that comprehensively blocks imports from Xinjiang could lead to higher commodity costs and hit corporate profits.
Recently, Foreign Minister Wang Yi stated in a video conference that Sino-US relations cannot continue to deteriorate and correct decisions must be made. Whether it can improve the Sino-US foreign trade environment remains to be seen.
The impact of the bill on the industrial chain of my country’s cotton textile industry
Relevant agencies believe that the U.S. authorities are expected to take effect on June 21 with the “Prevention of Forced Uyghur Labor Act” and will implement an import ban on goods from China’s Xinjiang region in accordance with the bill. The signing of the bill will give my country’s cotton textile industry chain The impact is mainly reflected in:
It will have a great impact on the export of Xinjiang cotton, further hitting Xinjiang cotton consumption, leading to a reduction in the use of Xinjiang cotton, and the risk of being separated from the international industrial chain, affecting the development of my country’s cotton textile industry chain. Recently, there has been feedback from textile companies that U.S. end customers have made it clear that starting from June 22, the products they purchase must undergo genetic testing by U.S. Customs. Once it is found that the cotton used in the product comes from Xinjiang, China, Uzbekistan and Turkmenistan, they will be on the spot. destroy.
According to feedback from companies, some major clothing brands in the United States may no longer place orders from China in the future. Some brands in Europe and Japan have stopped or reduced the use of Xinjiang cotton.
Although the United States is suppressing my country’s textile industry, my country’s foreign trade “circle of friends” continues to expand. Our country is also actively exploring emerging markets such as ASEAN, Africa, and Latin America. Among them, the proportion of trade with countries along the “Belt and Road” in my country’s total foreign trade value has increased from 25% in 2013 to 29.7% in 2021.
price upside down
Cotton enterprises are “too cold to be at high places”
In May, the price difference between domestic and foreign cotton prices continued to invert sharply. From a trend perspective, the amplitude no longer deepened and showed a low and wide range of fluctuations. Today’s cotton companies can be described as “too cold”. The current spot price is over 2,000 yuan/ton. Due to the high price of seed cotton purchased in the early stage, coupled with the low sales rate and loan repayment pressure, corporate funds are extremely tight. The entire upstream cotton processing industry is facing difficulties. to the predicament. There are still four months until new cotton is launched, and cotton sales are lagging far behind the same period last year, so the market is not optimistic. At the end of May, there was news that banks had extended a moratorium on loan repayments for cotton ginning plants. The pressure on the cotton ginning mills to repay loans has been suspended, giving them time to raise prices again. Recently, there are rumors in the market that Xinjiang will have a small-batch purchase and storage policy to alleviate the current difficulties of cotton ginning mills.
In late May, as rainfall eased drought in the Texas region of the United States, cotton futures prices both at home and abroad fell. Among them, Zheng Cotton’s main 09 contract fell as much as 1,200 yuan/ton in just six trading days. Subsequently, it stopped falling after encountering strong support at the 20,000 yuan/ton line. On June 8, Zheng Cotton’s main contract closed at 20,320 yuan/ton, a decrease of 0.61%. At present, domestic Zheng cotton overall remains weak. Cotton spot trading on the 9th improved slightly compared with the previous day, but the overall price was still weak.
In the medium term, the basic contradiction between domestic lint supply and demand has not been effectively resolved, and there will still be downward pressure in the later period. On the one hand, the sales progress of domestic lint cotton is slow and the sales pressure is shifting. Once the funds of the ginners are threatened, the possibility of selling at reduced prices to withdraw funds cannot be ruled out; on the other hand, the lack of follow-up orders from the downstream, coupled with the strict investigation of the Xinjiang cotton ban, domestic lint cotton The consumption situation is not optimistic for the time being.
Textile downstream market sentiment remains low
Practitioners are in a wait-and-see mood
During the Dragon Boat Festival holiday (June 3 to June 5), the textile market demand did not improve significantly. In addition, most companies were on holiday before and after the Dragon Boat Festival, and the progress of downstream raw material procurement slowed down again. Some textile mills are generally cautious and pessimistic about the market outlook and have limited willingness to purchase raw materials. However, some market activity has improved slightly.
It is understood that the current yarn profits of some textile companies are still negative. Although the loss margin has decreased compared with last month, downstream demand continues to be sluggish, and there is basically no market. (The situation of mid- to high-end and low-end varieties, pure cotton, and blended varieties is basically the same. Same), so those whose raw material stocks have bottomed out dare not buy, and those who still have raw material stocks dare not spin (the more they spin, the more they lose).
Recently, as cotton prices have fallen, the theoretical processing profits of textile companies have narrowed. As of this week, the theoretical processing profit loss of cotton 32S variety is about 400 yuan/ton. On the one hand, poor price transmission in the industrial chain has led to losses in processing profits by textile companies; on the other hand, the scarcity of downstream orders has ultimately led to the lack of willingness of textile companies to replenish raw materials and low operating rates.
At present, market transactions are weak, downstream purchasing enthusiasm is not high, and traders are mainly waiting and watching. Even if factories with stable cooperation reduce prices, the stimulation effect on traders will be limited. In terms of weaving mills, the current small orders of low- and medium-count gray fabrics are being shipped, while regular and high-cost gray fabrics are not being shipped well. Home textile orders continue to be sluggish, and weaving mills are pessimistic.
As Shanghai lifted its lockdown and textile factories in the Yangtze River Delta and other places resumed work and production, market confidence rebounded and downstream purchases increased to a certain extent, but new orders did not pick up significantly. Domestic Zheng cotton futures fluctuated within a narrow range, with a weak trend. Due to the decline in futures, the number of transactions in cotton orders increased significantly. In the yarn market, inquiries from downstream weaving mills have increased, but the procurement situation is still relatively cautious.
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