Market Analysis: Fluctuation Of Domestic And Foreign Cotton Prices In A Week

This week, domestic cotton prices rose; International cotton price fluctuation; The domestic cotton yarn price has turned from falling to rising, while the international cotton yarn price has declined slightly; Domestic polyester staple fiber prices rose slightly.

1、 Domestic cotton price rises

This week, the atmosphere of domestic cotton spot trading continued to be depressed. On Tuesday, the market again heard the news of Xinjiang cotton inventory tension and the continuous high temperature weather, and the long funds increased their positions, rapidly raising the main contract price of Zheng Mian to more than 17000 yuan/ton, and then maintaining a narrow fluctuation. The spot price of cotton continued to rise. On July 10-14, 2023, the average settlement price of the main contract of Zhengzhou cotton futures will be 17002 yuan/ton, up 364 yuan/ton from the previous week, or 2.2%; The national cotton price B index, which represents the market price of standard lint in the mainland, averaged 17479 yuan/ton, up 164 yuan/ton or 0.9% from the previous week.

2、 International cotton price fluctuation

This week, the decline of the US dollar index and the rise of the US stock market at the beginning of the week boosted the international cotton price. Later, the news that the supply and demand forecast of the US Department of Agriculture was short, and the US cotton export sales data was poor, made the cotton price in the ICE period recoup its increase, and the international cotton price generally maintained range fluctuations. On July 10-14, 2023, the average settlement price of the main contract of cotton futures in New York was 81.18 cents/pound, 0.51 cents/pound higher than the previous week, or 0.6% higher; The international cotton index (M), representing the average landed price of imported cotton in China's main ports, averaged 93.81 cents/pound, up 0.61 cents/pound or 0.7% from the previous week; Converted into RMB, the import cost is 16346 yuan/ton (calculated by 1% tariff, excluding port miscellaneous and freight), up 106 yuan/ton or 0.7% from the previous week. The average price of domestic cotton is 1133 yuan/ton higher than that of international cotton, and the price difference is 67 yuan/ton smaller than that of the previous week.

3、 The domestic cotton yarn price has turned from falling to rising, while the international cotton yarn price has declined slightly

This week, the domestic cotton yarn market continued to weaken. Small and medium-sized cotton textile mills were obviously short of orders, and the stock accumulation rate rose. Driven by the rise in cotton prices, the domestic cotton yarn prices rose slightly. In the international cotton yarn market, the terminal demand of developed countries continued to fall, and the international cotton yarn price fell slightly. At present, the average price of conventional outer yarn is 129 yuan/ton lower than that of domestic yarn. The domestic grey cloth market continued to be light, with further reduction in trading volume, and the price of cotton grey cloth remained stable. The price of polyester staple fiber rose slightly with the price of raw material PTA.

4、 Future prospects

Inflation pressure in the United States has eased, and international cotton prices may continue to consolidate. The consumer price index (CPI) of the United States increased by 3% year-on-year in June, falling to the lowest level since March 2021. Core CPI rose 4.8% year on year, the smallest increase since August 2021. The market expects that the Federal Reserve is at or near the end of this cycle of interest rate increases. In terms of the cotton market, from June 30 to July 6, the net contracted volume of American cotton in 2022/23 was 5239 tons, 79% less than the previous week, and 76% less than the average value of the previous four weeks, reflecting the weak international demand for cotton. According to the July supply and demand report of the US Department of Agriculture, the global output in 2023/24 will be 25.439 million tons, an increase of 26000 tons over the previous month; The consumption was 25.354 million tons, a decrease of 120000 tons compared with the previous month, and the demand for insufficient production was turned into a small surplus from the forecast last month. As of July 9, the excellent rate of American cotton was 48%, up 9% year on year. Recently, the southern cotton producing areas of the United States continued to be hot and rainy. Last week was the hottest week since records were kept in the United States. Some traders believed that American cotton would grow worse. In terms of the textile market, the demand for textiles in Southeast Asia continues to be poor. The rise in energy prices has increased the pressure on textile mills to operate, and textile mills in India and Vietnam have more shutdowns; In June, Pakistan's textile exports fell by 13%, and this fiscal year saw a cumulative decline of 15%. On the whole, the inflation pressure in the United States has eased, and the hot weather may have a negative impact on the growth of American cotton, but the international demand for textiles and clothing is still weak, and the international cotton price may continue to consolidate.

There is no lack of speculation on the domestic supply side, and cotton prices may fluctuate strongly. According to the data of the National Bureau of Statistics, the purchasing managers' index (PMI) of China's manufacturing industry in June was 49.0%, up 0.2 percentage points from the previous month, and the prosperity level of the manufacturing industry has improved. In the cotton market, according to the data of the National Cotton Market Monitoring System, 47000 tons of lint were sold nationwide this week, a slight increase of 8000 tons month on month. The decline in cotton textile consumption deepened, and the yarn inventory accumulated. The operating rate of textile mills sampled in early July was 87.7%, down 1.9 percentage points month on month; The yarn production and sales rate was 86.4%, down 8.4 percentage points month on month. According to the data of the General Administration of Customs, China's textile and clothing exports in June reached 188.09 billion yuan, down 10.8% year on year. The recent rise in cotton prices has led to the expansion of the losses of textile mills. The price difference between polyester and cotton has remained at more than 10000 yuan. The rebound of the spot exchange rate of RMB against the US dollar has reduced the cost of cotton imports and made cotton more substitutable or more alternative to cotton. Recently, the continuous high temperature weather in Xinjiang has not had a significant impact on the growth of cotton seedlings as a whole. The cotton regions in the north and south of Xinjiang have successively hit the top and kept bolls, 5-7 days later than the same period of the previous two years. The meteorological department predicts that there will be high temperature weather above 35 ℃ in most of the plain areas in Xinjiang next week, and the market will be more worried about the output of the new year. On the whole, the domestic textile demand is weakening, and the market wait-and-see sentiment has increased after the cotton futures price jumped above the seven thousand mark. The main driving force behind the rise in cotton prices is supply side speculation, including hot weather, inventory decline, and the issuance of sliding allowance tax quota has not yet increased. It is expected that domestic cotton prices will fluctuate slightly.