Flame retardant fabric_Flame retardant fabric_Cotton flame retardant fabric_Flame retardant fabric information platform Flame-retardant Fabric News Production reduction is the foundation, and speculation is the driving force. Is the bull market for cotton coming?

Production reduction is the foundation, and speculation is the driving force. Is the bull market for cotton coming?

On June 5, it was 16,914 yuan/ton; on June 6, it was 17,179 yuan/ton; on June 7, it was 17,306 yuan/ton; on June 8, it was 17,385 yuan/ton… Recently, cotton prices have shown…

On June 5, it was 16,914 yuan/ton; on June 6, it was 17,179 yuan/ton; on June 7, it was 17,306 yuan/ton; on June 8, it was 17,385 yuan/ton… Recently, cotton prices have shown an overall upward trend. Entering June, China’s cotton price index has been rising day by day, and the upward trend is unstoppable.

Judging from the reactions from all parties in the market, some said it was unexpected, some thought it was expected, and some even said it was capital speculation. So, what factors are driving this rise in cotton prices? Does the sharp rise in cotton prices mean that the cotton bull market is coming? In the face of cotton price fluctuations, how do textile companies respond?

Cotton production reduction is the basis and market speculation is the driving force

“The rise and fall of cotton prices are usually affected by supply and demand. At present, the recovery of the downstream market is not as good as expected. The demand for cotton yarn by fabric companies has not increased significantly, while the cotton price has increased significantly. The reason is that this round of cotton price rise is mainly due to Market speculation.” said Yang Runkai, executive director of the Henan Textile Industry Association.

Yao Yu, senior cotton analyst at Hua’an Futures, holds the same view. He said that the market has been speculating on expectations of cotton production cuts for a long time.

On June 1, cotton prices rose sharply, and the main contract of Zheng cotton futures once reached its daily limit. “From the supply side, the large reduction in cotton production in the new year is the basis for the increase in cotton prices, and the main reason for the reduction is the poor weather conditions during the cotton sowing period in Xinjiang.” Yao Yu said that since April, Xinjiang’s main cotton producers Rainfall and cooling weather have occurred many times in the region, causing cotton sowing to be delayed. In May, rain and snow weather once again occurred in most areas of Xinjiang, and cotton suffered from low temperature and freezing damage. With the cotton planting area expected to decrease, abnormal weather has strengthened the market’s concerns about a reduction in cotton production and pushed up cotton prices.

Yao Yu said that the national new cotton output this year is expected to be 5.3 million tons-5.6 million tons, a reduction of more than 10% from last year.

The survey feedback from various futures institutions also confirms the above research and judgment.

Research by Huarong Rongda Futures Cotton Research Center shows that extreme weather in Xinjiang’s cotton areas has been more frequent this year, delaying the normal growth of cotton seedlings. In 2023, the average seedling emergence in northern Xinjiang is 77.99%, and the average cotton seedling height is 4.69cm. In the Aksu region of southern Xinjiang, the average seedling emergence is 73.58%, and the average cotton seedling height is 3.78cm. Preliminary estimates show that the cotton planting area in northern Xinjiang dropped by 6.65% and the cotton planting area in southern Xinjiang dropped by 8%-10%. Xinjiang’s cotton output is expected to be 5.675 million tons.

The latest cotton research report released by COFCO Futures shows that the actual cotton sowing area in Xinjiang is expected to decrease by about 8.5% year-on-year in 2023, the cotton yield in Xinjiang will decrease by about 6.7% year-on-year, and the cotton output in Xinjiang will be about 5.12 million tons, a year-on-year decrease of about 14.7% .

Data provided by CITIC Futures also predicts that the cotton planting area in Xinjiang will decrease this year. CITIC Futures analyst Wu Jingwen said that based on feedback from companies and cotton farmers visited, the year-on-year changes in cotton planting area in various regions of Xinjiang are: Changji decreased by 10%-20%; Kuitun decreased by 7%-10%; Yuli County decreased by 5%; Korla Reduction of 12%-25%; Saya reduction of 14%. “Based on the area changes in other regions, we give an estimate of a decrease of 8%-10% in Xinjiang’s cotton planting area.”

“If the reduction in cotton production in Xinjiang in the new year is the basis for this round of cotton price increases, then market rumors that Xinjiang’s cotton stocks are tightening in total are the boosters for the rise in cotton prices.” Yao Yu said that at the end of April The cotton inventory in Xinjiang is 3.37 million tons. Market rumors indicate that the cotton inventory in Xinjiang at the end of May was 1.8 million tons – 1.9 million tons. “The market is rumored that there is not enough cotton in Xinjiang. In addition, several major manufacturers are frantically raiding goods, which directly detonates the market.” Sentiment, this became an opportunity for cotton prices to rise sharply.”

Buy as you go is the norm, the market situation remains to be seen

“Beginning on June 1st, the cotton price trend has been relatively fierce. In just a few days, it once rushed from 15,000 yuan/ton to 17,000 yuan/ton, or even higher. The reactions of various companies are not consistent, but Generally speaking, we adopt a wait-and-see attitude, do not blindly follow the trend of purchasing, and wait for the future trend of cotton prices.” Yang Runkai said that the fluctuations in cotton prices caused by market speculation are difficult to control. In the short term, companies are waiting and watching, unwilling to make big purchases, but as time goes by, In the long run, enterprises will make purchasing decisions based on their own development conditions and their judgment of the market. If you seize the right time to purchase, you will make money. On the contrary, you will have to bear the risk of loss. This is what happens every year.

For cotton spinning companies, fluctuations in cotton prices directly affect the company’s production costs. “China Textile News” reporter learned that large-scale cotton spinning companies in the market usually choose to purchase when they think the price of cotton is appropriate, relying on their procurement experience and financial tools. The inventory of raw materials is also relatively sufficient, but for most small and medium-sized enterprises, , buying as you use is still its main purchasing rhythm.

“For larger cotton spinning companies, the inventory of raw materials is stable and can basically maintain production for 1-2 months. The fluctuation of cotton prices has little impact on them. However, cotton spinning companies with a production capacity of tens of thousands of spindles will According to the variety and order volume, we will make immediate purchases, even if the cotton price increases, as long as we continue to produce,” Yang Runkai said.

The survey results of the China Cotton Textile Industry Association also confirm this. The survey shows that the orders of pure cotton yarn cluster enterprises are mainly short-term and small orders. The current order volume has declined compared with May, product sales have slowed down, and some enterprises plan to reduce production and keep cotton raw materials readily available.�’s criteria.

At the same time, in the face of rising cotton prices, most companies said that the price transmission effect brought about by rising raw materials in the short term is not obvious.

“Most cotton spinning companies in Henan produce conventional varieties. Although cotton prices have risen, when cotton yarn companies tentatively offer upward quotations, downstream companies do not accept it.” Yang Runkai said that textile companies can be said to be “sailing on the sea, each with its own tricks.” . Faced with low product profit margins, companies either choose to partially suspend production and reduce production; or they choose to reduce cotton use and use other non-cotton fibers to replace cotton to tide over the current difficulties.

“Many yarn companies have insufficient orders in June, and they have not dared to raise prices simultaneously with this round of rising raw material prices.” Dai Jun, chairman of Yueda Textile Group, said when talking about the market situation, since March, cotton products have Orders have increased significantly, and 40-count and 60-count yarn products are in short supply. Xinjiang companies’ pure cotton yarn orders are full and prices are rising. This is inseparable from factors such as market restocking and domestic consumption recovery. Judging from the current situation, home textile orders have shown weakness, and there has been no news about foreign orders in the second half of the year. Companies are taking a wait-and-see attitude towards the market in the second half of the year.

“The long-term increase in cotton prices has a certain driving effect on the industry’s upward trend. As a cotton spinning company, we hope that the industrial chain can be completely opened up, the price transmission is smooth, and the yarn market price can also rise accordingly. Only in this way can the competitiveness of cotton spinning companies be truly restored. .” Dai Jun said.

The oscillating market may be maintained. The future trend depends on supply and demand.

“The main driving force for the cotton market trend in the second half of the year is still on the supply side. Under the combined influence of extreme weather, overcapacity of ginners, and demand for seed cotton exceeding supply, if the rush to harvest occurs again, it will push cotton prices higher.” Regarding the trend of cotton prices in the second half of the year, Yao Yu believes that in the short term, cotton prices are likely to maintain oscillations during the hype period. In the medium and long term, under the expectation of production reduction and harvest harvest, the center of gravity of cotton prices may maintain an upward trend. The price range is expected to be 15,000 yuan/ Ton-18,000 yuan/ton. “The market outlook needs to focus on weather changes, which will be directly related to the output of new cotton, and whether it will stimulate the market again and cause a rush for harvest. In addition, the degree of marginal improvement in downstream consumer demand also needs to be focused on.”

Wang Qianjin, Director of the Market Development Department of Shanghai International Cotton Trading Center, believes that the cotton spinning industry chain is still facing multiple contradictions at this stage. The core elements of cotton fundamentals in 2023/2024 revolve around marginal improvement in demand, relatively stable supply and destocking. In the second half of the year, companies need to focus on the match between reality and expectations. Before new cotton is launched, the cotton market will most likely remain “strong internally and weak externally”, and the price gap between domestic and foreign cotton may continue to expand, affecting consumption. He predicts that cotton prices are expected to fluctuate between 15,000 yuan/ton and 17,000 yuan/ton in the second half of the year.

“It is difficult to predict the cotton price trend caused by capital speculation. If cotton prices continue to rise in the future, if they maintain a slow rise for three months, the stimulating effect on the cotton spinning industry will be more obvious.” Talking about the cotton price trend, Yang Runkai said, Textile companies hope that cotton prices will maintain a stable trend. Even if they rise or fall, they will change seasonally based on supply and demand, rather than fluctuating significantly due to capital speculation.

“Capital speculation on cotton prices is often ‘very hurt’ for cotton spinning companies. When companies purchase cotton when cotton prices fluctuate greatly, it is like a gamble. If the bet is wrong and the price of cotton that has been stored for a long time suddenly drops, it will Facing a huge risk of loss.” Yang Runkai said that last year, many companies suffered huge losses due to the sharp fluctuations in cotton prices, leading to bankruptcy.

Yang Runkai called on relevant national management departments to use policy control measures such as import cotton quotas and cotton reserve rotation to control cotton prices to maintain a stable trend and protect industrial enterprises.

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Author: clsrich