This week, domestic and foreign cotton prices rose rapidly and then turned to oscillation, with the average price significantly higher than last week’s level; domestic and foreign cotton yarn prices rose; polyester staple fiber prices turned from rising to falling.
1. Domestic cotton prices turned to oscillation after a sharp rise
This week, the central bank lowered the price of financial institutions. The deposit reserve requirement is 0.5 percentage points, releasing about 1 trillion yuan in long-term funds, supporting the rise in domestic cotton prices, with Zheng cotton approaching the 17,000 yuan/ton mark; with the release of steady economic growth data in the second quarter, the market’s excessive pursuit of gains has cooled down. Cotton prices turned volatile. From July 12 to 16, 2021, the average settlement price of the main cotton futures contract on the Zhengzhou Commodity Exchange was 16,674 yuan/ton, an increase of 283 yuan/ton or 1.7% from the previous week; the national cotton price represents the market price of standard grade lint cotton in the mainland. The average price of the B index was 16,747 yuan/ton, an increase of 323 yuan/ton from the previous week, an increase of 2.0%.
2. International cotton prices first rose and then fell, with the average price higher than last week’s level
This week, Federal Reserve Chairman Powell reiterated that inflation is only a temporary phenomenon, calming market sentiment and pushing up international cotton prices. However, the market’s concerns about the sustainability of economic recovery and inflation lingered, and the increase in international cotton prices slowed down on Friday. From July 12 to 16, 2021, the average settlement price of the main contract of Intercontinental Exchange Cotton Futures (ICE) was 88.87 cents/pound, an increase of 1.46 cents/pound or 1.7% from the previous week; representing the arrival of imported cotton at China’s main port The average price of the International Cotton Index (M) on shore is 99.03 cents/pound, up 1.00 cents/pound or 1.0% from the previous week. The import cost in RMB is 15,790 yuan/ton (calculated based on 1% tariff, including Hong Kong miscellaneous goods). and freight), an increase of 157 yuan/ton, or 1.0%, from the previous week. The international cotton price is 958 yuan/ton lower than the domestic cotton price, and the internal and external price difference has expanded by 167 yuan/ton compared with last week.
3. The auction of reserve cotton continues to be active, with transaction prices rising steadily
This week, The auction of reserve cotton continued to be hot, and the transaction price rose slightly. From July 12 to 16, 2021, the average transaction price of reserve cotton was 16,403 yuan/ton, an increase of 5 yuan/ton, or 0.03% from last week; among which, the average transaction price of Xinjiang cotton was 16,467 yuan/ton, an increase from last week 7 yuan/ton, an increase of 0.05%; the average transaction price of real estate cotton was 16,260 yuan/ton, a decrease of 15 yuan/ton, or 0.09%, from last week.
4. Domestic and foreign cotton yarn prices rise simultaneously
This week, with the rise of Zheng cotton, Domestic textile companies have simultaneously raised yarn prices, but the transaction volume has not yet increased. Affected by the rise in domestic and foreign cotton prices, as well as port congestion and rising freight prices, the quotations for foreign yarns have increased. The current price of conventional foreign yarns is 260 yuan/ton lower than that of domestic yarns. After the prices of upstream cotton and cotton yarn increased, inquiries for downstream gray fabrics did increase, but prices have not yet followed the increase. Profits for fabric orders and quotations are still tight, and companies mainly focus on sales and fixed production. The price of polyester staple fiber changed from rising to falling with the trend of crude oil.
5. Market outlook
Global Inflation continues to surge, with ICE approaching the resistance level of 90 cents/pound. The number of job vacancies in the United States hit a record high in May, and the consumer price index in June hit the largest increase since 2008. Economic recovery momentum is weakening and inflation concerns are intertwined, leaving the Federal Reserve in a dilemma. In terms of the international cotton market, heavy rains in the US cotton area are detrimental to the growth of new cotton. As of July 11, the budding progress of new cotton in the US was 55%, 6 percentage points less than the same period last year; the monsoon rains in India are progressing slowly, with Gujarat and northern states Cotton areas remain dry. According to the July production, sales and inventory forecast of the United States Department of Agriculture, global cotton production in 2021/22 is increased by 113,000 tons from the previous month to 25.994 million tons, a year-on-year decrease of 6.07%, and consumption is increased by 135,000 tons from the previous month to 26.814 million tons. A year-on-year increase of 3.84%; the ending inventory-to-consumption ratio dropped from 72.88% last month to 71.24%; after the main ICE futures contract rose by nearly 90 cents/pound, some companies continued to decline in price-point purchasing enthusiasm. U.S. cotton exports, contracts and shipments decreased last week. In the short term, the international cotton market sentiment is greatly affected by the external market, and cotton prices mainly fluctuate in a wide range. The ICE cotton price of 90 cents/pound is an important resistance price.
Economic growth is slowing down marginally, the central bank has lowered reserve requirements to protect entities, and the rise in domestic cotton prices is controllable. The latest data from the National Bureau of Statistics show that my country’s GDP growth rate was 7.9% in the second quarter (18.3% in the first quarter, and the two-year average was 5.5%). Premier Li Keqiang pointed out when presiding over a symposium of economic situation experts and entrepreneurs that overall planning In the second half of this year and next year, the economy will operate within a reasonable range. The recently implemented RRR reduction measures should focus on supporting small, medium and micro enterprises and labor-intensive industries. In terms of the domestic cotton market, Xinjiang cotton has recently entered the flowering and boll stage, and the growth of cotton is gratifying. The quotations of most cotton companies in the spot market have risen along with future prices. Textile companies continue to focus on rigid demand for purchases, and the transaction of reserve cotton is still hot. This week, 47,700 tons of reserve cotton were listed, and the transaction rate continues to be high. After the rapid rise in cotton prices and cotton yarn, domestic orders for downstream fabrics have slowed down, while orders for export fabrics have improved compared to before. There are currently differences in policies between China and the United States, and financial markets are becoming more cautious. The trend of Zheng cotton was bumpy on Friday, and we need to beware of the impact of external market uncertainty.
</p
