Sino-US negotiations restart cotton spot market rebound but still full of variables

Release time:

2019-07-05

Since mid-June, with the meeting between the leaders of China and the United States and the resumption of trade negotiations, global agricultural prices rebounded as a whole, and the spot market of cotton also started to rise, with the CF1909 contract rising from 12720 yuan/ton to 14300 yuan/ton, up 12.42 percent.

Some cotton dealers adopt a "three-pronged approach" of spot price, fixed price of warehouse receipt and spot sales quotation. The deserted cotton spot market from May to June finally glowed with spring. Mainland textile enterprises stopped watching and wanted to test the water for purchase. It is worth noting that in the past half a month, the daily turnover rate of reserve cotton rounds has returned to a high level. Industry analysis, the recent cotton consumption with the rebound in futures began to pick up, cotton prices are gradually back on track, cotton-related enterprises, investors panic by the resumption of Sino-US trade negotiations and weakened.

According to Henan, Shandong, Hubei, Anhui, Jiangsu and other places with part of the cotton enterprise survey, cotton consumption has "pick-up" signs but not prominent, there are still some small and medium-sized cotton mills, weaving mills, garment mills to reduce production or even stop production to reduce the risk (three shifts to two shifts, two shifts to one shift, wages by 60-70%). Some foreign trade companies and textile and clothing enterprises said that the impact of the Sino-US trade war was mainly on orders from August to September (although the crackdown on production and sales in July has already appeared, it can still be digested in various ways). However, freezing three feet is not a day's cold. Even if China and the United States make good progress in trade negotiations from August to September and even sign an agreement, it will take "time for space" for the return of orders and the improvement of consumption ".

First of all, after more than a month of destocking of raw materials and products, some spinning enterprises do have a small amount of plans to replenish the stock, but most of them are mainly to maintain production and buy as they use.From the survey point of view, since the middle of May, many domestic weaving and garment enterprises have started the mode of "de inventory, return capital and guarantee operation", and the effect is remarkable. With the passage of time, the inventory of cotton and other raw materials has dropped to a low level. From the perspective of "no shutdown, guaranteed production, reduced cotton distribution and low risk", we will increase bidding for cotton reserves and purchase "point price" resources. However, there is little stock-up when purchasing "point-to-point.

Secondly, the downstream gauze market downturn, production and marketing upside down, cotton yarn has not yet formed an effective support for cotton prices.According to the survey, the current cotton yarn inventory of spinning enterprises is seriously losing money (mostly more than 1000 yuan/ton); Even if the "Double 28" Xinjiang machine-picked cotton inland warehouse in early July is 14,500-14,600 yuan/ton (metric weight), there is almost no profit in spinning C32S yarn. If reserve cotton is used in combination with Xinjiang cotton in stock, the profit of spinning C32S and C40S yarns is acceptable, but whether they can be shipped and paid back in time.

In addition, Sino-US trade negotiations are still full of variables, spinning and clothing enterprises to take orders and production cautious.The result of the Osaka meeting between Chinese and US leaders is "neutral". Although the US side has suspended the imposition of tariffs on US $350 billion Chinese exports to the US, the premise is that China is required to import a large amount of US food and agricultural products. Moreover, all the US tax collection procedures have been completed and may fall at any time. However, the resumption of trade negotiations between China and the United States is only the starting point of the trade war. Differences between the two sides still exist, The content and the agreement and the agreement and the negotiation attitude have not changed, chinese enterprises still need to be prepared for this "protracted war and war of attrition.