With a strong bullish atmosphere, how will the cotton market change?



On February 7, the first day of trading after the holiday, there was a strong bullish atmosphere in the domestic market, and the prices of bulk commodities, including cotton, rose …

On February 7, the first day of trading after the holiday, there was a strong bullish atmosphere in the domestic market, and the prices of bulk commodities, including cotton, rose sharply. During the seven-day Spring Festival holiday, changes in external market conditions have a greater impact on the domestic market.

futures market

Affected by the rise in ICE foreign cotton prices, the domestic Zheng cotton CF2205 contract price rose to a maximum of 22,210 yuan/ton on the first day of trading, exceeding the highest point in October last year and setting a new high in eleven years. Foreign cotton prices have performed strongly under the support of bullish factors such as rising crude oil and improving demand, forming strong support for domestic cotton futures prices. As the basis difference between cotton futures and cash prices gradually narrows, hedging opportunities gradually emerge, and the pressure for Zheng cotton to continue to rise sharply increases.

spot market

Before the holiday, cotton spot market sales were deserted, upstream ginning companies were reluctant to sell their inventory, and downstream textile companies were cautious in purchasing. The cotton market has undergone major changes after the holiday. The price of Zheng cotton has risen sharply, driving the spot quotation to rise. The quotation of cotton per ton has increased by 300-400 yuan/ton compared with before the festival. Since it is the first day of resumption of production after the Spring Festival, there is basically no change in spot purchases in the market. First, textile companies replenished their inventory in time before the holiday, but are not willing to restock after the holiday; second, there are still companies that are on vacation and have no willingness and demand to purchase raw materials. It is expected that the spot market will return to normal only after the cotton spinning industry chain fully resumes work and production.

textile market

Downstream textile companies have resumed work and production one after another, and some companies have started up late. It is expected that the cotton spinning industry will be able to fully resume production after the tenth day of the first lunar month. Downstream textile companies said that there are currently few new orders, and the production starts on the first day after the holiday are basically for production and delivery of pre-holiday orders. There are also companies that have not received new orders and choose to start up early in order to stabilize their workforce. Zheng cotton prices rose sharply on the first day after the holiday. Downstream customers were more enthusiastic about purchasing cotton yarn than before the holiday, and cotton yarn quotations rose slightly. At present, the cotton spinning industry has low inventories. As the inventory of raw materials is consumed, the willingness of enterprises to purchase will gradually increase. Whether the upstream cotton price can continue to be strong is critical to the smooth transmission of yarn prices to the downstream.
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Author: clsrich

 
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