The trend of the bulk commodity market this year seems to be more important than in previous years. First, the sharp decline in ferrous metal varieties after the year attracted the market’s attention, which caused the bottom of bulk textile raw materials to continue for many months. When the market reached the middle of May, it was originally The textile off-season has been awakened by the futures market again.
Recently, cotton, which has been dormant for many days, suddenly experienced an explosive rise. Since May 12, the price of cotton futures has been rising like a “rocket”, rising by nearly 720 yuan in two trading days, and today it even hit the daily limit.
“Rocket style” rise hits the daily limit! The cotton market has been ignited. Is the textile market in the off-season really awakened by the futures market again?
Trigger: The surge in U.S. cotton ignited Zheng cotton
Since May, Zheng cotton has experienced a downward adjustment for nearly half a month, and the short side of the market has been extremely firm. Nowadays, agricultural products represented by cotton have once again experienced a surge in prices, which immediately caused a commotion in the market. There are many analyzes in the industry about this surge. The more unanimous view is that it was driven by the rise in the external market, among which the surge in US cotton was the most important factor.
Since the USDA first released its global cotton supply and demand forecast for 2017/2018, ICE July cotton has surged, rising 7.6% in two trading days and hitting the daily limit on May 12, reaching a high of 82.18 cents/lb. . U.S. cotton is an important indicator of global agricultural commodity prices. The daily limit of U.S. cotton has directly driven Zheng cotton’s strong rise, igniting the market’s hot spot.
In addition, boosted by policies related to the Belt and Road Initiative, in early trading on the 15th, most commodities, led by Zheng Cotton, rose, and chemical products rose. As of noon closing, Zheng Cotton rose 3.42%.
The spot market under the skyrocketing price of Zheng Cotton: a matter of course
In fact, excluding factors on the futures side, the Yellow River Basin has been rising since the middle of last month.
Since early April, the purchase price of seed cotton in various cotton areas in Xinjiang and the Mainland has “opened higher and moved higher”. It is understood that the delivery price of Xinjiang cotton spot “Double 28” hand-picked cotton in 2016/17 also ranged from 15,300-15,500 yuan/ The price per ton was raised to 15,800-16,000 yuan/ton (delivered to the factory at 16,000-16,200 yuan/ton), an increase of 3.23%. Therefore, in terms of cost, the cost of CF1709 will probably not be less than 16,300 yuan/ton (deducting the 500 yuan/ton cotton transportation subsidy out of Xinjiang).
The quotations of reserve cotton circulating in the market for the second time were also unable to restrain the upward trend, and the lowest transaction price rose from 14,666 yuan/ton to 15,312 yuan/ton, an increase of 4.4%;. Calculated based on the current reserve cotton cost of 15,312 yuan/ton (the average cost of cotton raw materials for most textile companies bidding is not higher than 14,500 yuan/ton), the cost and sales price of cotton spinning mills spinning C32S and C40S yarn are already at a loss. Therefore, the downstream spinning mills are already at a loss. The transaction prices of yarn and gray fabrics are also about to fluctuate. Some manufacturers’ yarn prices of C32S and above count have increased by 100-200 yuan/ton.
Some people even use the phrase “strong winds and flying clouds” to describe the current cotton situation. Therefore, it is not surprising that Zheng Mian’s contracts have opened sharply higher in recent days. Everything seems to have come naturally.
How long can cotton market prices rise? These factors require special consideration
1. Foreign cotton market: Is the rising signal solid?
According to analysts, under the background of destocking in the global cotton market, the overall pattern of cotton prices is fluctuating upwards. Cotton, which is at a historical low, has formed an obvious value depression. Funds’ allocation demand for cotton has been unprecedentedly high, forming a net long position for funds. A forced position pattern against unpriced orders. The USDA report in May not only confirmed the continuation of the trend of global cotton destocking in the new year, but also confirmed the reality of tight old crops in the United States, completely igniting the explosive point. The old crop July contract has evolved from a volatile increase to a short-squeeze surge, and the market outlook may be Challenge the high of 93 cents/pound.
2.Export situation: Will it continue to reverse?
Recently, domestic and foreign sales orders for downstream gauze, fabrics and clothing have increased, especially the export situation has reversed. According to recent data from the General Administration of Customs, in March 2017, my country’s textile and clothing exports were US$20.017 billion, a month-on-month increase of 82.35%, and a year-on-year increase of 18.78%; the cumulative textile export volume from January to March was US$23.269 billion, a year-on-year increase of 1.22%.
In addition, as the exchange rate of the Indian rupee against the U.S. dollar has continued to strengthen sharply in recent months, India’s exports of cotton yarn, textiles and clothing to European and American countries have declined rapidly; while China’s major competitors such as Vietnam, Indonesia, Turkey, and Pakistan have continued to import U.S. imports due to the continued high level of ICE. Cotton, Brazilian cotton, West African cotton, etc. are difficult to reduce, and their domestic labor, energy, tax and other costs have increased, so the competitiveness of textile and apparel exports has also been weakened. In addition, due to the release of cotton reserves, the cost of spinning medium and low-count yarns for textile companies has declined, which has increased bargaining space in terms of export quotations, supply and other aspects, and enhanced competitiveness.
The rebound in textile industry exports is expected to give a strong boost to the upstream cotton industry.
3. Downstream factors: Does the lack of peak season mean that the off-season is not slow as well?
After three seasons of gold and silver, the traditional peak season for textiles has left, and in recent years the market hasThere is a strange phenomenon everywhere: the dividing line between peak season and off-season is becoming increasingly blurred. Judging from this year’s gold, three and silver prices, the cotton yarn market has shown a trend of not being prosperous in the peak season. On the contrary, the market has a “tail-up” at the end of the peak season. Does the market’s change in the lack of peak season in recent years have an off-season? Possibility of not being weak?
In addition, with the strengthening of risk awareness, the current raw material use cycle of spinning enterprises has been reduced from 45-60 days to 20-30 days. The reserves of cotton yarn, gray cloth and fabrics of weaving enterprises and garment enterprises have also continued to decrease. “Buy” has become the norm. Therefore, with the inventory of fabrics and raw materials falling at the same time, it is difficult for the market to fall sharply. And when the rising trend comes, will some manufacturers’ mentality of buying up and not buying down reappear?
Of course, driven by the external market, Zheng Mian’s stock rose by more than 5% in just two days. Judging from these figures, there is no problem for Zheng Cotton to cooperate with the external market performance in the short term, but if you want the cotton market to rise for a long time, you must consider the above factors. Therefore, it is not too early to boldly predict that cotton prices will rise to a certain point based on Zheng Mian’s temporary performance. After all, everyone knows that there are too many variables in the cotton market process…
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