Last week, the domestic cotton textile market gradually entered a state of preparation for the holiday, and downstream dyeing and finishing plants began to shut down one after another this week. As of January 14, 2022, CY C32S pure cotton yarn closed at 28,500 yuan/ton, an increase of 300 yuan/ton from last week.
Cotton futures mostly showed a strong and volatile trend last week, rising by more than 300 points during the week, or 1.55%. Affected by the US USDA report on Thursday, which reduced US cotton production and year-end inventories, which was bullish for the market, Zheng Cotton rose by more than 200 points in a single day, or more than 1%, and the rest of the trading days showed little fluctuation. On the spot side, after futures prices rose, some traders made concessions to the basis, but market turnover still did not improve much. As of January 14, the CC3128 cotton index closed at 22,460 yuan/ton, an increase of 127 yuan/ton from the same period last week. Market transactions were generally average, and downstream yarn mills gradually began to take holidays and only maintained essential purchases. As of the 14th, cotton stocks of textile companies closed at 31.8 days, a decrease of 0.8 days from last week.
In terms of cotton yarn, merchants in many regions raised the spot price of cotton yarn last week. On the one hand, the price of cotton raw materials increased, and on the other hand, because textile companies gradually digested the early low-price costs, the cost gradually increased. During the week, the price of cotton yarn rose to 300-500 yuan/ Ton or so, real orders are still profitable; spot transactions have partially picked up, and volumes are relatively differentiated. This is mainly due to the approaching holiday, and the purchase volume of downstream and cotton yarn traders who just need to replenish their stocks has picked up, but small batch orders are still the main ones. Cotton yarn inventories of textile companies showed a downward trend last week, and profits are still at a loss. Some manufacturers’ losses have expanded. Some textile companies have begun holidays last week. As of the 14th, the pure cotton yarn inventory of textile companies had closed for 24.7 days. At present, some textile companies have begun to take holidays, and it is expected that most small and medium-sized textile companies will take holidays one after another this week. On the other hand, the market has strong expectations for the “Gold, Three, Silver and Four” products after the new year. Textile enterprises and traders have responded that there may not be much market demand before the new year, but there may be batch orders in the traditional peak season after the new year.
In recent times, due to the larger-than-expected reduction in domestic cotton production in India and the 10% tariff imposed on imported cotton in India, the price of domestic cotton in India has risen sharply, from 65,800 rupees/cut land on December 21 to 72,100 rupees. / Cutting land, an increase of 9.57%, reaching a historic high in the past 10 years, which has caused Indian cotton yarn quotations to also rise. The rise in Indian cotton yarn has stimulated the global cotton textile market price center to continue to rise. On the other hand, the decentralization of orders from the European and American markets (mainly the United States) to the Southeast Asian market has led to a very good export order forecast for the Southeast Asian market. As of January 14, the internal quotations of India C32S, Pakistan C20S, Vietnam C32S, and Uzbekistan C32S were 27905, 25000, 28245, and 28065 yuan/ton respectively, which increased by 50 to 150 yuan compared with a week ago.
Looking at the market outlook, before the Lunar New Year, the midstream and downstream markets gradually enter the seasonal off-season shutdown state compared to the upstream. Textile companies are trapped in the comprehensive considerations of cotton yarn processing profits and the risks of receiving orders before the year, so they are relatively cautious in replenishing cotton raw materials. The time window for textile enterprises to replenish their inventories starting from the end of December has continued until the end of last week. The market has basically completed the replenishment of raw materials for the holidays before the holiday. Most of the current inventory levels of textile enterprises can be maintained until mid-February. A few can last until the end of March or April. Therefore, we are expected to be relatively cautious about the impact of future purchases from midstream textile companies on price support. In view of the strong external performance, India has single-handedly pushed the center of gravity of global cotton prices upward. The country is trapped by high raw material prices, and domestic demand is subject to the impact of the domestic epidemic on residents’ income and consumer confidence. Export orders are subject to the recovery of the supply side of the overseas supply chain. The cotton yarn market will not perform well beyond expectations in the short term.
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