Recently, cotton futures prices have continued to hit new highs. Is the rise in market demand a complete recovery or a flash in the pan due to financial speculation? With many questions, the reporter went to Shandong Textile Cluster for investigation, hoping to reveal the rise and fall of the market. The truth behind.
Production capacity decreased slightly, cotton yarn profits were higher
During this research and visit, companies generally One reason for the rise in cotton prices is that cotton yarn companies have been shut down since the epidemic last year, and production capacity has declined. As the domestic epidemic took the lead in getting under control, consumption gradually recovered, market orders increased, and existing production capacity was stretched.
The person in charge of an enterprise in Weifang told reporters that in the past four years, the cotton spinning industry has suffered from poor performance and many enterprises are struggling to survive. In the early days of the epidemic in 2020, the country adopted very strict control measures to prevent the spread of the virus, and most companies shut down their factories. In the end, the surging epidemic became the last straw for companies, and some companies chose to withdraw.
During the visit, we found that the production situation of cotton spinning enterprises this year is good, which has never been experienced in previous years. Orders are overwhelmed and profits are very high. One company said that taking combed 60-count yarn as an example, the market price of the product is 39,700 yuan/ton, and the price of cotton raw materials is 18,000 yuan/ton. After excluding certain cost expenses such as raw materials, labor, and electricity, the profit of cotton yarn is considerable. In order to seize such opportunities, companies are intensively arranging production orders, and employees’ vacation time is also minimized. Many companies have even begun to expand production capacity.
Cotton yarn raw materials are rising, cloth end conduction is blocked
Surprisingly, cotton yarn production and sales are abnormal Although the market is booming, cloth prices have been relatively stable, with limited impact from price increases on the raw material side. An interviewed company in Zibo said that the company is involved in cotton yarn, cloth, clothing and other aspects. Although the profit of cotton yarn is very good, the profit of cloth is relatively low. Due to the large production capacity of cloth machines, in addition to all the self-produced cotton yarn, a large amount of external procurement is required. Cotton prices have been rising for a period of time, and yarn price transmission has been relatively smooth. However, cloth price transmission has encountered considerable resistance. Simply raising the quotation will not be recognized by downstream customers.
Another trading company said that price transmission in the cloth link is generally slow. As long as the price increase on the raw material side can be maintained for a period of time, the price can be transmitted.
Enterprise business risks increase and industrial chain inventories remain low
Enterprise products and scales vary, and raw material inventories There are differences too. The cotton inventory of some companies is generally two months long, which is lower than in previous years. Some companies only stock for about a week because cotton prices have increased too much and they are worried about price adjustments. Now the high price of Zheng Cotton’s main contract has reached 17,800 yuan/ton, and the high price of CF2101 contract, which is about to become the main contract, has also exceeded 18,000 yuan/ton. Even if there is a large adjustment at the high level, it is normal, which means that the company’s operations Risks increase because high raw material prices mean high cost expenditures.
Some companies also reported that due to the rare boom in the industry, low inventories of cotton spinning and cloth have left room for cotton prices to rise. Although cotton commercial stocks are large, the resources that can actually circulate in the market are limited. Nowadays, cotton basis price trading is operating very well, and most resources are involved in hedging. Cotton prices continue to rise, causing spot resources in the market to be temporarily locked up. This can be seen from the reserve cotton auction. The bidding floor price has been continuously raised, but the enthusiasm of enterprises to bid is very high.
The export market has recovered and orders have increased significantly
It is understood that as the epidemic gradually comes under control in the second half of the year , people’s production and life have gradually returned to normal order, and suppressed consumption has been released. At the same time, coupled with the transfer of orders from overseas markets, the number of corporate orders has increased significantly this year.
According to the latest data from the General Administration of Customs of China, from January to June 2021, my country’s cumulative export volume of textiles and clothing was US$140.086 billion, a year-on-year increase of 12.06%, of which the cumulative export volume of textiles It was US$68.558 billion, a year-on-year decrease of 7.38%; the cumulative export volume of clothing was US$71.528 billion, a year-on-year increase of 40.26%. Judging from export data, my country’s clothing exports continue to maintain a good momentum.
The export-oriented companies interviewed believe that the U.S. and European consumer markets have indeed rebounded since this year, especially in the U.S. market, where exports have grown significantly. The biggest problem is the price of clothing. The increase is limited. Although the raw material market has seen a large increase, the price increase of end consumer goods is weak, with an increase of only 2-3%. This figure is far lower than the increase of upstream raw materials. The Japanese and Korean markets are recovering slowly. The epidemic in Japan is still serious, consumption recovery is weak, and export growth is slow. The African market has maintained a good momentum, with export data significantly better than last year.
There is a strong rush to harvest and the price of seed cotton is expected to be high
A Xinjiang cotton person told reporters that every year in Xinjiang When new flowers come on the market, there will be varying degrees of rush to harvest them in various places. After all, the processing capacity is far greater than the supply of raw materials. This year, there is still more than a month before the new flowers are launched. With cotton futures prices already running at a high level, the atmosphere of rush to harvest is even stronger.
At present, the market generally expects the purchase price of seed cotton to reach about 8.0 yuan/kg, which is equivalent to a lint price of nearly 18,000 yuan/ton. Of course, we need to pay attention to the cotton seed market. Last year, the purchase price of seed cotton rose from 5.2 yuan/kg when the scale was opened toThe highest point was above 8.0 yuan/kg, and the market showed a crazy side. At that time, the futures price was 14,000-15,000 yuan/ton. Now the futures price is already at 17,500 yuan/ton, and the opening scale price is full of imagination. Cotton production this year is generally stable and may be slightly lower than last year. However, Xinjiang professionals believe that faced with the limited quantity of seed cotton, there are not many options left for ginners. With the increase in production and processing lines, rushing to harvest can make The only way for a contract factory to make a profit.
High cotton prices have not yet occurred, and hidden market risks still exist
In view of the future cotton price trend , some companies believe that there is still room for continued upside. On the one hand, the water released by the Federal Reserve is temporarily difficult to recover. The global economy is still struggling and needs liquidity to support it. Once the balance sheet begins to be reduced, it will be a fatal blow to the market. On the other hand, the cotton spinning industry is at low inventories, and there is room for continued recovery in consumption in the future, including the fact that the rise in the crude oil market is far from showing signs of peaking.
Some cotton spinning professionals are also worried that it is too early to talk about cotton prices continuing to hit new highs. Recently, the “Delta” mutated virus has begun to spread globally, and the number of confirmed cases in many countries has increased significantly, including The domestic epidemic has also spread from point to surface. Our country’s epidemic control measures have been extremely strict, but the virus is still pervasive. Especially the United States has announced that it will not adopt nationwide blockade measures, which has laid hidden dangers for the potential spread of the virus. Once it breaks out again, the consequences will be unimaginable, like the sword of Damocles hanging over your head at all times. It can be seen that in the future market, as cotton prices continue to rise, risks are gradually accumulating. </p
