On August 23, the “Announcement on Matters Concerning the Rotation of Central Reserve Cotton in 2021” was released. The next day, the closing price of cotton futures CF2201 fell sharply by more than 400 yuan/ton. The contract hit 17,365 yuan/ton, a new low in the past two weeks. At a time when domestic cotton futures are soaring after reaching 18,000 yuan/ton, the introduction of this announcement is of great significance and will significantly cool down the hot cotton futures market in the short term. Cotton is a vital raw material for cotton spinning enterprises, which largely determines the profitability of cotton textile enterprises. It can be said that the relevant agencies introduced this policy in a very timely manner from the perspective of cotton costs for downstream enterprises and the health of the industrial chain.
The policy is released, and only textile companies are allowed to participate in the auction of reserved cotton
In order to ensure the cotton needs of cotton textile enterprises, on August 23, China Cotton Reserve Management Co., Ltd. and the National Cotton Trading Market issued an announcement on matters related to the rotation of central cotton reserves in 2021 (click the blue text to read).
The announcement clarifies that from August 24, 2021 until the end of this year’s rotation, the reserve cotton rotation transaction will only be limited to textile cotton companies participating in the bidding, and non-textile cotton companies will stop participating. Bidding. The reserve cotton purchased by textile cotton enterprises is limited to the enterprise’s own use and may not be resold.
Policy impact, cotton and cotton yarn futures prices have fallen sharply
Chinese yarn Line network statistics show that the price of cotton spinning raw materials increased significantly in the first half of this year. From July 1 to August 23, the main contract of Zhengzhou cotton futures increased by 12%; from July 1 to August 23, cotton yarn Futures 2201 rose 10%. Recently, cotton futures have hit a new high in the past three years. After breaking through 18,500 yuan/ton, they have fallen sharply back to around 17,500 yuan/ton. Affected by this, the market has a strong wait-and-see atmosphere, and downstream purchases are mostly on-demand.
Affected by the adjustment of the reserve cotton rotation policy, cotton and cotton yarn futures prices fell sharply on August 24. On August 24, the cotton spot trading atmosphere was good, and spot price transactions were more active. Some textile companies and traders found low points. On August 24, CF201 closed at 17,385 yuan/ton, down 475 yuan/ton from the previous trading day. The decline reached 2.66%. On August 24, the domestic reserve cotton auction was still 100% completed, but the average transaction price dropped sharply by 611 yuan/ton to 17,186 yuan/ton, and the 3128B discount price was 18,389 yuan/ton, a decrease of 582 yuan/ton from the previous day. Ton.
In addition, on August 24, the settlement price of cotton yarn futures CY2201 contract fell by 75 yuan/ton to 25,770 yuan/ton.
Judging from the transactions of the state’s reserve sales in recent years, the same document was issued when cotton prices were relatively high in 2018. Subsequently, the transaction rate of reserve cotton plummeted. The average transaction rate is around 40%, and this time the document on cotton reserves was also released after the cotton price hit a record high. However, the fundamental situation is very different from 2018. At this stage, spinning mill orders are tight, and most yarns The inventory of finished products is at a historically low level, and the transaction price of reserve cotton is still at a discount to spot goods. Textile companies will still actively participate in the auction of reserve cotton, effectively supplementing the demand for cotton in factories.
Picture: Inventory situation of textile enterprises in mainstream regions from 2018 to 2021
It is understood that as of August 20, the yarn inventory of textile enterprises in major regions across the country was 11.6 days, a decrease of 1.4 days from last week, a month-on-month decrease of 12.1%, and a year-on-year decrease of 53.1%. Most textile companies have tight order schedules and can maintain orders for 20-30 days. Spinners are in tight supply of pure cotton 32S and 40S yarns, and it takes about a week for large goods to be shipped. Spin mills are more willing to raise prices when finished product inventories are low, mainly delivering early orders from traders; it is expected that textile companies’ product inventories will remain at a low level in the short term.
Since August, the overall market for yarns, which was originally strong, has weakened. The current trading atmosphere in the spot market of pure cotton yarn is not good and the trading volume is declining. Affected by the sluggish downstream demand and the pullback of cotton, the quotations of textile companies have been relaxed, and the prices of conventional varieties have been reduced by 200-300 yuan/ton. There is a lack of new orders, but companies are still rushing to make early orders, so inventories are still at historically low levels.
In terms of varieties, conventional yarns and high-count yarns have relatively weakened, while open-end spinning has improved slightly. In terms of price, the JC40S bleached quality products produced in Shandong are priced at 31,500-32,000 yuan/ton with invoices, the high-end C40S products produced in Shandong are priced at 28,500-28,800 yuan/ton with invoices, the C60S bleached quality products produced in Sichuan are quoted at about 37,000 yuan after pick-up, and the C32S jet belts produced in Jiangsu are priced at around 37,000 yuan/ton. The ex-factory price of tickets is 27,000-27,500 yuan/ton.
Curb the excessive speculation of cotton in the capital market
In the first half of this year, a large amount of capital poured into cotton and even When investing in the cotton yarn futures market, the rapid surge in cotton futures prices inevitably makes people worry that excessive raw material costs will destroy the normal textile industry. The implementation of the policy shows the country’s determination to care about the healthy development of the textile industry chain. China Yarn Network believes that this announcement is mainly to ensure the cotton spinning enterprises use cotton, and the cotton spinning enterprises will be least affected. In the long term, it will be beneficial to cotton spinning enterprises purchasing cotton and reducing the risk of enterprise raw material procurement. .
Picture: The closing price of the futures market on August 25
Since the announcement strictly supervises the rotation of cotton reserves and prevents capitalization operations, it will partially curb the speculation of current cotton in the short to medium term. Further stabilization of cotton prices will be conducive to the stable operation of cotton-using enterprises.
It is also necessary to observe the market price of new cotton in the future. At present, there is still a month until new cotton is launched, and the market has high expectations for the launch of seed cotton. It is expected that even if the purchase price of new cotton rises to 8-10 yuan per kilogram this year, there will be ginners rushing to harvest it.
External demand for textiles and clothing is better than domestic demand
Due to the response to the epidemic at home and abroad Different measures have been taken, the economic recovery progress at home and abroad is different, and the performance of external demand and domestic demand for textile and clothing is not synchronized.
In terms of external demand, from January to July, textile exports denominated in US dollars decreased by 10.8% year-on-year, an increase of 15.7% compared with the same period in 2019; clothing exports increased by 32.9% year-on-year, compared with the same period last year. The same period in 2019 increased by 7.0%. Among them, in July, textile exports fell by 26.7% year-on-year and 6.5% month-on-month; clothing exports increased by 8.3% year-on-year and 9.4% month-on-month. With the recovery of the global economy, coupled with the early placement of Christmas orders and the transfer of orders in some regions, clothing exports continue to grow.
In terms of domestic demand, from January to July, domestic retail sales of clothing and textiles increased by 29.8% year-on-year, an increase of only 2.3% compared with the same period in 2019. Among them, retail sales of clothing and textiles increased by 7.5% year-on-year in July. The domestic economy is recovering normally, and domestic retail sales of clothing and textile products have only increased slightly compared with before the epidemic. Overseas stimulus policies continue to increase. External demand for textiles and clothing is significantly better than domestic demand. However, domestic sales peak season orders have not yet started. It is recommended that companies pay attention to the placement of export orders and domestic sales orders.
From the perspective of specific links in the industrial chain, from January to July, yarn production increased by 16.0% year-on-year, down 11.8% from the same period in 2019; cloth production increased by 12.7% year-on-year, A decrease of 28.7% compared with the same period in 2019. Recently, the profit margin of cotton yarn is relatively large, while the profits of gray fabrics are constantly being squeezed, and the downstream profit transmission is not smooth. The inventory performance of different links is also different. Textile enterprises still have active demand for replenishment of cotton raw materials, finished cotton yarn inventory is low, and weaving mill inventory increased slightly.
Pay attention to the follow-up “Golden Nine Silver Ten” downstream order launch situation
Cotton futures prices have fallen sharply, and it is expected that yarn prices may fall back in the short term. However, the current order schedule of yarn mills is tight, and the inventory of finished products in pure cotton yarn factories remains at a low level. Orders can be maintained until the end of September, which has a negative impact on cotton prices. There is still some support. Cotton prices are expected to fluctuate in the short term.
The current mentality of some people in the downstream is pessimistic, because the current terminal demand is generally weak, and the September peak season is approaching, and the market transactions have not improved significantly. There is insufficient confidence in the market to pull up, so place an order. The frequency has decreased, and with the Christmas foreign trade orders being overdrawn in advance, new orders from weaving factories are limited. It is recommended that companies pay attention to the subsequent start of downstream orders during the “Golden Nine and Silver Ten”.
Not allowing traders to participate in bidding and reserve cotton is undoubtedly beneficial to the operation of textile companies. It also shows that the supply of cotton is tight under the high cotton fluctuations. There is still one month left for new cotton to be launched. Everyone What do you think of the market outlook for cotton yarn? </p
