Last week (May 18-22), driven by the external market, Zheng Cotton rebounded strongly and hit a new high. However, the pressure on gauze sales continued unabated, and the rise in cotton prices failed to be effectively transmitted to gauze. Last Thursday, Zheng cotton began to correct and return to range consolidation.
As the foreign epidemic situation has eased, commercial activities have gradually restarted, and some export orders that were suspended in the early stage will be continued upon notification. A small number of orders appeared in autumn and winter, sales of medium and coarse-count cotton yarn improved, and the overall cotton spinning production capacity utilization rate remained at a low level of 60-70%. Price point has become the main body of cotton trading. There are few transactions in rising futures and more transactions in falling futures. The average transaction price is relatively stable. With the support of cotton prices, yarn prices have stopped falling and stabilized. A small number of varieties such as open-end spinning have slightly increased. The overall profit of yarn mills meager. The prices of cotton and cotton yarn are both inverted internally and externally, which is conducive to the recovery of domestic production capacity.
The epidemic in Europe has eased, but the epidemic in the Americas has not yet been effectively controlled. The risks in Sino-US relations have increased. The international trade environment is not optimistic. The recovery time of textile and clothing exports may be longer than expected. The impact of the epidemic on domestic textile and clothing consumption It’s also obvious. The price of polyester is 5,900 yuan/ton, a weekly increase of 350 yuan/ton driven by the rise in oil. Viscose prices have rebounded to a low of 8,800 yuan/ton, supported by costs, a weekly increase of 300 yuan/ton. The cotton CNCottonB index is 11536 yuan/ton, a weekly increase of 99 yuan/ton. Compared with Zheng Cotton CF2009, the discount is 44 yuan/ton, narrowing by 184 yuan/ton.
Futures. Driven by the external market, Zheng cotton rebounded strongly last Tuesday and Sanzheng cotton reached a new high, but spot consumption was sluggish. It began to pull back last Thursday and found support on the 20-day moving average. Zheng cotton’s main CF2009 contract closed at 11,580 yuan/ton, a weekly drop of 65 yuan/ton, with increased volatility, active trading, a significant increase of 51% in transactions, and a small increase in positions. Among the top 20 positions, there are 291,587 long positions, a weekly decrease of 31,240 hands, a 385,693 short position, a weekly decrease of 12,446 hands, and a net short position of 94,106 hands, an increase of 17,887 hands, a significant increase. There are 26,308 registered warehouse receipts, of which 17,358 are in Xinjiang warehouses, accounting for 66%. Inland warehouses are mainly concentrated in Jiangsu warehouses, accounting for 53%, with a weekly decrease of 587 receipts. There were 2,771 forecasts, a weekly decrease of 139, which continued to decrease, but the number of forecasts was still large, reflecting the continued pressure on spot sales. The epidemic situation in Europe and the United States has not improved, and Sino-US trade relations are facing tests. Backend consumption remains low. At present, it is difficult to see a significant improvement in June. Spinners are difficult to make profits and have tight funds. The recovery process of cotton consumption is difficult. Cotton prices continue to rise and are under pressure. It is expected that the main CF2009 contract of Zheng Cotton has a high probability of fluctuating in the range of 11,300-12,000 yuan/ton.
US market. Driven by China’s massive purchases, it has been rising for four consecutive weeks, and a large number of profit orders have accumulated during the session. However, poor export data has a negative impact, and the market has pulled back. Last Friday, ICE’s main July contract closed at 57.53 cents/ Pounds, down 66 points on the week. The main driving force of this round of rise is China’s implementation of the first phase of the agreement’s government procurement, not the increase in market demand. It remains to be seen whether China’s procurement intensity and procurement from other countries can recover in the future. With the global epidemic not showing improvement, normal international trade encountering challenges, the global economy experiencing a sharp downturn, and consumption significantly reduced, U.S. cotton continues to face pressure to rise, and this week may test the support of the 20-day moving average.
Spot aspect. The global epidemic has not improved yet, and the export of major varieties of yarn, cloth, and clothing has not yet resumed. A small number of previously suspended orders have been partially restarted, and new orders are few. Under the dual pressure of epidemic prevention and control and economic downturn, the income of domestic residents has dropped significantly, and clothing consumption has been even more impacted. Cotton mills have generally restricted production and closed down. Cotton consumption has remained at a low level and recovery has been slow. The callback on Thursday and Friday last week triggered some price point transactions. The transaction price in mainland warehouses was concentrated at 11,800-12,200 yuan/ton. The price of imported cotton was close to that of Xinjiang cotton. The price of Brazilian cotton was 12,000-12,800 yuan/ton. Because the price was close to Xinjiang cotton Selling less yarn is relatively better. Australian cotton sells for 14,500-15,500 yuan/ton. Although the quality is very good, it is mainly used for high-cost export yarns. At present, the export of high-count yarns is restricted, and the usage has been greatly reduced. Australian cotton shipments are very small. Indian cotton is priced at 11,500-11,800 yuan/ton. The price is relatively low, with a small amount of shipments. West African cotton is 12,000-12,200 yuan/ton, and US cotton is 12,500-13,500 yuan/ton. The price lacks a comparative advantage and there are few shipments. The purchasing strategy of yarn mills is to maintain the purchase strategy of buying as you use and bargaining at low prices. If Zheng Cotton continues to pull back this week, it is expected that the transactions at point prices will increase.
Operation suggestions. Before the epidemic situation improves substantially, epidemic prevention will remain normalized, the global trade environment will deteriorate, and the sharp economic decline will be difficult to reverse. Cotton consumption may remain at a low level for a long time, and cotton prices will remain volatile and gradually rise at the bottom. Spinners You can make periodic purchases on dips, and it is not advisable to chase high prices when prices rise rapidly. </p
