As the new year approaches, the outside world is expecting Zheng Cotton to adjust, but the market is still going its own way, and the main contract has continued to rise to around 22,000 yuan/ton. Such a trend is indeed unpredictable. As downstream industries gradually cease production and business operations, futures prices ignore it.
Futures are based on expectations. Just because the market is cold now doesn’t mean it won’t be good in the future. Now Zheng cotton has maintained strong operation to a large extent because the price of raw materials is strong. Whether it is domestic new cotton or foreign cotton, its prices are running at a high level. If the market is strong enough to support futures prices continuing to run at high levels, the reason is that downstream demand is good. Domestic textile companies experienced a good time last year, with sufficient orders and huge profits. At present, foreign textile companies are enjoying the good times we have had. The startup rate of companies continues to increase, orders from Europe and the United States are gradually returning, and some customers have reported that orders from Indian companies have been scheduled for half a year.
It is reported that driven by profits in the past two years, the global textile industry has experienced a round of expansion. Not only have new domestic projects been launched, but the scale of foreign countries has also grown rapidly, resulting in a substantial increase in demand for raw materials. At present, global cotton production is stable and demand is increasing. As the epidemic enters its third year, its impact on humans will gradually decrease, and society will soon be able to resume normal production and life. This will help repair and increase future demand.
Currently, foreign cotton prices are stronger than domestic cotton prices because foreign demand is better. Under such conditions, foreign cotton prices are more supportive. At the same time, the strength of foreign cotton prices will in turn affect domestic cotton prices. Of course, no matter how good the supply and demand pattern is, it will not keep rising. There will always be times when corrections are repeated, and the logic of futures return has been exhausted. In the future, the logic of supply and demand will still dominate. If demand can be maintained, prices will naturally continue to create new prices. A new high, on the other hand, the market has basically come to an end.
The positives and negatives before the holiday have been fully reflected in the market. The post-holiday trend does not rule out adjustments. Whether the strong trend can continue will need to pass the test of time.
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