Since mid-February 2022, the crisis in Ukraine has caused downward pressure on international cotton prices. Zheng cotton briefly followed the decline and then rebounded driven by the strength of the domestic commodity market. The price difference between domestic and foreign cotton has significantly expanded. As logistics and transportation problems have eased, the number of foreign cotton arrivals of various varieties has increased. According to data compiled by the National Cotton Market Monitoring System, as of mid-March, the uncleared foreign cotton inventory at the port was around 168,000 tons, a slight increase from the same period last month.
1. The price difference between domestic and foreign cotton has expanded significantly.
In the past month, domestic spot prices have remained strong. Zheng cotton futures fell briefly due to the conflict between Russia and Ukraine, and then continued to rise driven by rising oil prices. In the same period, the external market did not rise but fell due to demand concerns caused by rising oil prices. The internal and external markets showed The opposite trend occurs. Overall, the price difference between domestic cotton and imported cotton (M grade) has widened from about 500 yuan to about 1,800 yuan in the past month.
2. Industrial chain transmission is blocked and raw material replenishment is not active
Recently, the rapid spread of the domestic epidemic has led to various regions to upgrade epidemic prevention and control measures. Domestic and foreign sales of textiles and clothing new orders are not very prosperous. Domestic cotton yarn inquiries and shipments are not smooth. The accumulation of inventory in the middle and lower reaches of the textile industry chain is obvious. For cotton, The replenishment of raw materials has been pushed forward again and again. Gold, three, silver and four fines are obviously insufficient. At present, it is basically necessary to replenish the inventory. According to the industrial inventory report released by the National Cotton Market Monitoring System on March 15, as of the beginning of March, the average cotton inventory days of the surveyed companies was 33.7 days, a month-on-month decrease of 0.6 days, and the company’s willingness to restock fell by 8.3 percentage points month-on-month.
3. Foreign cotton stocks at ports have increased
In recent weeks, logistics problems at U.S. ports have eased, and U.S. cotton export shipments have continued to improve. Weekly shipments have remained at a high level of 80,000-90,000 tons, and the number of arrivals has increased compared with last month. During the same period, domestic textile downstream orders were not good, and textile companies were not active in replenishing inventories. In that month, bonded cotton inventories in Qingdao and Zhangjiagang increased month-on-month, while inventories in Nantong Port decreased slightly month-on-month.
According to data from the National Cotton Market Monitoring System, as of March 14, the foreign cotton bonded inventory statistics at major ports are as follows:
Qingdao Port has 125,000 tons, compared with 100,500 tons in the same period last month, including 25,000 tons of Brazilian cotton, 11,000 tons of Indian cotton, 46,000 tons of US cotton, 4,500 tons of Australian cotton, 1,500 tons of Central Asian cotton, and 31,000 tons of West African cotton. tons, Mexico, Sudan, Israel, Egypt, Greece, etc. total about 5,000 tons.
Zhangjiagang 35,000 tons, 32,000 tons last month, mainly US cotton, Brazilian cotton, Indian cotton and African cotton.
Nantong Port 9,000 tons, 10,000 tons last month, mainly American cotton, Brazilian cotton, Indian cotton and African cotton.
4. Later outlook
At present, the price difference between domestic and foreign cotton prices has widened significantly, and the state has issued additional import quotas with sliding tax, creating conditions for textile companies to arrange restocking. However, due to the current domestic epidemic situation, which has caused logistics and trade to be blocked, textile production and sales are not ideal, the procurement of raw materials is very limited, and the demand situation is not optimistic. At the same time, outsiders believe that China’s additional quota issuance will stimulate demand for foreign cotton, and U.S. cotton shipments continue to recover. Foreign cotton will continue to arrive at the port in the next few months, so bonded cotton stocks will continue to increase.
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