Zheng Cotton still had some intention of making a U-turn last week. On Tuesday this week, ICE cotton futures jumped to a high of more than three years.
Why the sudden surge?
On Tuesday, the ICE December cotton futures contract exceeded 92 cents/pound for the first time in several years. There are two main reasons for the surge in the foreign cotton futures market:
On the one hand: Members of both parties in the U.S. Senate passed a $550 billion infrastructure bill by a vote of 69-30 on Tuesday, marking the U.S. will implement the largest public infrastructure spending in decades, further increasing the U.S. economy and Consumption is expected to recover quickly.
Based on the trillion-dollar infrastructure bill being passed by the Senate, the Dow Jones Industrial Average and the S&P 500 Index once again fluctuated and closed higher during the session. A record high. Wind data showed that as of the close, the Dow Jones Industrial Average and the S&P 500 Index rose 0.46% and 0.10% respectively.
Affected by this, the main overnight ICE December contract closed at 92.35 cents/pound, an increase of 1.54%.
On the other hand, strong demand has increased market confidence. The strong rise in ICE cotton futures this time is closely related to the increase in funds entering the market. Now investors like to hold cotton. The reason why commodities are long is because global inflation expectations and the reopening of the global economy will lead to a significant increase in demand for textiles in the second half of the year.
Textile companies are optimistic about the prospects for the peak season
According to feedback from some cotton spinning mills in Jiangsu, Zhejiang, Shandong, Henan and other places, the CF2109 contract price last week successively recovered 17,500 yuan /ton lost ground, and the spot basis, spot price, and fixed price all rose in response. Traders in the light textile market in Guangdong, Jiangsu, Zhejiang, Shandong and other places have gradually entered the market to stock up on cotton yarn, gray cloth and fabrics (mainly considering the upcoming “Golden Nine and Silver Ten” period in the cotton textile industry). Therefore, cotton spinning mills are becoming more enthusiastic about raising the ex-factory price of cotton yarn again.
From the survey, the phenomenon of cotton yarn accumulation has increased compared with July, but it has not reached the “warning line” level. On the one hand, cotton spinning enterprises have active plans to stock up on conventional cotton yarns such as C32 and C40S, and are reluctant to sell; on the other hand, cotton and cotton yarn prices have been rising since August. The current price has increased significantly. Downstream weaving, fabric, clothing and foreign trade companies need time to digest the pressure of rising costs. There are many inquiries for cotton yarn, but the actual delivery is less than in the previous period.
As the “Golden Nine” peak season is gradually approaching, the market has optimistic expectations for the market outlook, and the confidence of textile companies is gradually increasing. Strengthening, currently textile companies are waiting for the demand for orders from the downstream market near the peak season, and the expected return of superimposed orders has strengthened. Cotton futures have risen, hitting the resistance level of 18,000 yuan/ton.
The US$500 billion infrastructure bill provides sufficient confidence in currency flows for the upcoming peak season.
The rise in cotton futures this time is not accidental, but the resonance of multiple favorable factors such as increased market demand and the return of orders. From the current point of view, when the price of new cotton is expected to be high, even if cotton is now at a high level, downstream companies are still considering replenishing stocks at appropriate prices. As the demand for the textile market is gradually released during the “Golden Nine” peak season, the textile market will Enterprises are worried that cotton and yarn may rise further.
As Big Brother Cotton rebounds again, the embarrassing situation of “high costs and thin downstream profits” has also ushered in some changes. The downstream market has gradually accepted the price of cotton yarn, and the pure cotton yarn market has been trading Investment gradually recovered. With domestic and foreign cotton leading the rise, some textile companies and traders raised their quotations by about 200 yuan/ton. On August 11, the price of 40S high-grade carded cotton was about 29,600 yuan/ton; the price of combed 32S was about 30,700 yuan/ton.
What are the reasons for cotton companies to plan to increase cotton yarn prices?
First, the COVID-19 epidemic has returned in Southeast Asian countries such as Vietnam and Indonesia, and cotton textile and clothing companies have been increasingly affected (statistics from the Vietnam Textile and Clothing Association show that 30% of the country’s 35% of garment factories have closed down), and orders will accelerate back to China. Coupled with the arrival of the “Golden Nine and Silver Ten” in the domestic market, orders from cotton textile companies will be very sufficient.
Second, in the past week or so, the quotations for imported cotton yarn shipments and bonded prices have continued to be strong, and the center of gravity has continued to shift upward. The net weight quotations are once again “inverted” with the quotations of the same domestic yarn of the same quality in terms of weight. 200-300 yuan/ton, the price comparison effect stimulates cotton spinning mills to raise prices.
Third, the upgrade of epidemic prevention and control measures in Jiangsu, Hubei, Hunan and other provinces has caused cotton yarn production and shipment to be affected to varying degrees, and the overall supply of cotton yarn has weakened.
Fourthly, in the past week or so, cotton futures prices have risen significantly and some cotton spinning mills have purchased raw materials at high prices. The net profit of cotton spinning mills has declined, and textile companies are eager to increase the price of raw materials. The cost is passed to downstream and terminals.
Recently, the driving factor in the market has gradually shifted from the reshoring of orders to demand growth. On the one hand, the rising trend of global downstream demand remains unchanged. On the other hand, midstream and downstream companies are gradually accepting high raw material prices out of anticipation of the situation. Next, companies need to focus on the transmission of rising prices in the industrial chain, the transfer of orders from Southeast Asia and the peak season. Order placement status.
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