This week, the overseas geopolitical risks escalated, and the wait-and-see mood became stronger. The enthusiasm for downstream replenishment was low, and the spot sales of lint remained slow. The domestic cotton price fell rapidly after the small rise in the peripheral markets. On February 21-25, 2022, the average price of national cotton price B index representing the market price of standard lint in the mainland was 22233 yuan/ton, up 14 yuan/ton or 0.1% from the previous week; The average settlement price of the main contract of cotton futures in Zhengzhou Commodity Exchange was 21288 yuan/ton, down 117 yuan/ton or 0.5% from the previous week.
2、 International cotton prices fell after consolidation
This week, the conflict between Russia and Ukraine escalated, the global financial market was turbulent, the prices of energy, grain and metal fluctuated significantly, the risk aversion pushed the US dollar index to a nearly two-year high, and the international cotton price fell after consolidation. On February 21-25, 2022, the average settlement price of the main contract of ICE on the US Intercontinental Exchange was 120.48 cents/pound, up 0.17 cents/pound or 0.1% from the previous week; The international cotton index (M), which represents the average landed price of imported cotton at China’s main ports, averaged 136.59 cents/pound, down 0.14 cents/pound, or 0.1%, compared with the previous week, and converted into RMB 21091 yuan/ton (calculated at 1% tariff, excluding port charges and freight), down 23 yuan/ton, or 0.1%, compared with the previous week. The international cotton price was 1142 yuan/ton lower than the domestic cotton price, and the price difference was 37 yuan/ton larger than the previous week.
3、 Weakening of cotton yarn prices at home and abroad
This week, the domestic textile market was weak and stable as a whole, raw material procurement slowed down, orders had not been released, and yarn inventory increased. Some enterprises reduced yarn prices to reduce inventory pressure, and the decline of domestic cotton yarn was further obvious. With the weakening of demand in the international textile market, the turnover of outer yarn export is weak, and Indian yarn leads the price of outer yarn to continue to fall. The average price of conventional outer yarn is 1407 yuan/ton higher than that of domestic yarn. The orders of some domestic weaving enterprises have not improved significantly, and they are generally lack of confidence in the future market. The price of cotton cloth has declined from a steady state. The price of polyester staple fiber fell with the price of raw material PTA.
4、 Future outlook
The situation in Russia and Ukraine further pushed up inflationary pressure and increased risks in the international cotton market. Russia and Ukraine are tense. The soaring crude oil price has pushed up inflationary pressure, and the US Federal Reserve’s interest rate increase is “on target”. In terms of international cotton, the USDA Outlook Forum released the forecast data of cotton supply and demand in 2022/23. The total global cotton output was 27 million tons, an increase of 3.2% year on year; The demand was 27.56 million tons, with a year-on-year increase of 1.7%. With the approaching of cotton spring sowing in the Northern Hemisphere, Texas, the United States, held a meeting to discuss the new year’s cotton planting plan. The Southeast Asian textile market transactions showed a weakening trend. Pakistan’s cotton yarn exports fell by 32% month on month in January, and textile and clothing exports fell by 4.4% month on month. India’s domestic demand for summer clothing was delayed due to cold weather, and the purchasing power of the clothing terminal consumer market was insufficient. The consumer confidence index of the United States fell to a low point in five months in February. In the short term, the tension between Russia and Ukraine has increased the risk of the peripheral environment, and the wait-and-see mood has increased significantly. The international cotton market may fluctuate in a weak way.
The policy of ensuring supply and stable price continued to advance, and the domestic cotton market was cautious. The executive meeting of the State Council stressed that we should continue to do a good job of ensuring supply and stabilizing prices of bulk commodities, ease the pressure of rising costs of downstream enterprises, and maintain basic stability of prices. The NDRC further improved the coal market price formation mechanism and promoted the return of coal prices to a reasonable range. In the domestic cotton market, the spot transaction of lint is still slow. The national cotton monitoring data shows that as of February 24, 2022, the national lint sales progress is 37.1%, a year-on-year decrease of 33.7 percentage points. As the temperature gradually warms up, the spring irrigation work of preparing for cultivation has been carried out in some areas of Xinjiang, and cotton farmers have strong confidence in planting cotton in the new year. In the textile market, enterprises rarely replenish the stock, and still mainly consume the raw material stock before the festival. According to the survey of China Cotton Network, the number of new orders in the downstream is relatively small, down 30% compared with the same period last year. The recent spread of COVID-19 in Suzhou, Jiangsu Province, led to the temporary suspension of some textile enterprises. The terminal replenishment of downstream grey cloth and clothing is insufficient, and some weaving enterprises in Guangdong, Jiangsu and Zhejiang inform the suppliers that they will delay purchasing. In the short term, the volatility of overseas financial markets has intensified, the upstream and downstream game of the industrial chain is still continuing, and the domestic cotton price is mainly cautious.
Post time: Sep-21-2022