This time, the South African variant of the coronavirus has had a great impact on the world. Many countries have announced lockdowns. Crude oil has fallen below US$70/barrel. Other commodities have followed suit. Cotton has performed very well, falling from 21,500 yuan/ton in just three days. The lowest price nearby fell to around 20,000 yuan/ton. At present, everyone is very concerned about the future cotton price. The rise and fall are related to whether the normal production and operation of enterprises can proceed smoothly.
We believe that the probability of cotton prices continuing to fall sharply in the short term is small. After all, cotton prices have fallen by more than 1,000 points under the impact of the epidemic. If they continue to fall sharply, new hot events will be needed. In the future, we still need to pay attention to the overall supply and demand situation of cotton, because when new cotton production is launched, consumption will dominate the future cotton price trend. We just recently returned from a survey in Fujian, and the downstream consumption situation is indeed not ideal.
Fujian’s textile industry has developed rapidly in recent years, especially in chemical fiber yarns and blended yarns. During the investigation, a textile company in Fuzhou said that there are currently about 10 days left for orders, which is significantly lower than the same period last year. The cotton inventory is about half a month, which is also lower than in previous years. Cotton prices have risen to a high level and will fall rapidly once the trend changes in the future. Therefore, in order to control risks, raw material inventories have been reduced. The current yarn inventory is more than 20 days, which is significantly higher than that in the first half of the year. The main reason is that the purchasing volume of downstream weaving factories has dropped significantly. The most critical issue now is that most of the companies are migrant workers. They will take vacations and go home for the New Year in December. The operating rate will continue to decline in the future, which will affect cotton consumption in the future and the situation in other cotton spinning industry clusters. Basically similar.
Short-term consumption is weak, coupled with the impact of the new coronavirus variant, and under the influence of the overall market pessimism, cotton prices have plummeted. As people gain a deeper understanding of the variant virus, panic will gradually ease, but does this mean that this is the case? The start of a downward trend remains to be verified.
The prices of cotton and cotton yarn are highly correlated. Currently, cotton yarn is in the stage of strong flower and weak yarn. In November, the price of cotton yarn fell by 1,000-2,000 yuan/ton, mainly due to insufficient demand, weakened cost support, and enhanced chemical fiber substitution effect. There are still two months until the Spring Festival. Pay attention to the stocking progress of downstream companies and the trend of cotton prices before the holiday.
Downstream negative feedback appears
Since the price of cotton yarn increased by 3,000-4,000 yuan/ton in October, the follow-up of downstream orders has been weak, the price increase has not been transmitted smoothly, and cotton yarn has gradually accumulated in inventory. In addition, traders have taken profits, imported yarn has impacted the low-end market, and cotton spinning mills have used the cotton in stock. Spinning is still profitable. In November, the price of cotton yarn dropped by 1,000-2,000 yuan/ton, and some high-count yarns that had increased significantly in the early period dropped by about 2,500 yuan/ton.
At present, the production of textile enterprises is gradually recovering, but the demand for cotton yarn is not good, and the accumulation of inventory is accelerating. Some small textile enterprises are passively reducing their loads, and there is a strong wait-and-see atmosphere. In terms of raw materials, due to poor demand and high cotton prices, cotton spinning mills generally purchase according to orders. Some companies purchase cotton from state reserves or purchase Xinjiang cotton or imported cotton at bargain prices. As of November 29, the national average price of carded high-grade C32S was 30,000 yuan/ton, a decrease of 1,500 yuan/ton from the same period last month, a decrease of 4.76%.
The global epidemic recurred in October. Some textile companies in Vietnam and other Southeast Asian countries continued to restrict production, and some foreign orders returned to China, which contributed to the resonance of cotton and cotton yarn prices. However, the short-term surge in cotton prices is not conducive to textile companies receiving orders. In October, the production cuts of some textile companies in East China, North China and other places expanded to about 50%. In addition, the company’s old customers have normal shipments, and the accumulation of cotton yarn is slow. However, after entering November, as the production of textile enterprises returned to normal, new orders were not followed up, the accumulation of cotton yarn accelerated, and the price of cotton industry chain showed negative feedback. As of November 29, the theoretical average profit of carded ring spinning high-end C32S was -864.40 yuan/ton, a decrease of 1503.82 yuan/ton from the same period last month, and an increase of 326.54 yuan/ton from the same period last year. Due to poor profits, some textile companies have accelerated the accumulation of cotton yarn in their warehouses and have begun to limit production. Some companies plan to take an early holiday during the Spring Festival.
Enhanced chemical fiber substitution effect
Since 2018, the price difference between cotton and polyester has fluctuated around 6,000 yuan/ton, and the price difference between cotton and viscose has fluctuated around 3,000 yuan/ton. Since entering 2021, cotton prices have fluctuated and risen, and the price difference between cotton polyester and cotton viscose has continued to widen and hit a record high. According to research, as of November 29, the national average price of 3128B lint cotton is 22,435 yuan/ton, the price of 1.4D*38mm polyester staple fiber in East China is 6,900 yuan/ton, and the price of 1.5D*38mm viscose staple fiber in Jiangsu and Zhejiang is 13,750 yuan/ton. , the price difference between polyester and cotton is 15,535 yuan/ton, and the price difference between cotton and viscose is 8,685 yuan/ton. The price advantage of chemical fiber is obvious, and its substitution for pure cotton series products has become stronger. Some textile companies have adjusted the cotton-polyester ratio with the consent of customers, increased the amount of polyester staple fiber and viscose staple fiber, and reduced the proportion of cotton.
After oscillating at high levels for more than a month, under the influence of repeated epidemics and weakening demand expectations, the main contract of Zheng cotton fell below the 21,000 yuan/ton mark this week, and the spot price fell by about 500 yuan/ton. The support of cotton yarn raw materials has weakened, and the wait-and-see atmosphere of downstream companies has heated up. Some companies have suspended cotton yarn purchases, and some early prepayment customers have even delayed delivery or even defaulted. The follow-up orders are not good, and the cotton yarn warehouse of the cotton spinning factory is…��It has accumulated rapidly to about 1 month. Some companies are holding up their prices and waiting to see, and the overall transaction volume is weak. In terms of price, some cotton spinning mills have communicated with downstream companies about order prices, and the downstream intended cotton yarn purchase prices have returned to pre-National Day levels, which means that all the cotton yarn price increases since October may have to be given back, and cotton yarn prices are still 1,000-2,000 yuan/ton. Room to fall. However, as the support for raw materials weakens, the center of gravity of downstream receiving prices may continue to shift downward.
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