The cotton yarn market is cloudy and rainy

[168TEX News] Near the end of the year, most spinning manufacturers are under great financial pressure, merchants’ debt recovery progress is slow, and inventories are basically maintained at about one month. The overall operating rate has dropped slightly from about 65% in the previous period to 60%. As some companies withdraw funds from inventory at the end of the year and sell at low prices at a loss, while some companies insist on breakeven sales, causing confusion in the market’s regular quotations of cotton yarn.
Recently, the cotton yarn market has continued to be weak, and prices have continued to fall. Under the impact of low-priced imported yarn, the decline in cotton yarn was greater than that of cotton, with the cumulative decline being 300-500 yuan/ton. In addition, funds will be withdrawn at the end of the year, so there is a large room for price concessions in cash transactions. The gross profit of yarn mills has been compressed, and conventional varieties are at a loss. The overall volume of goods shipped in the market was average, with sporadic small order transactions mainly taking place. Looking at specific varieties, the sales of carded 21S, 32S, and 40S high-quality yarns are slightly concentrated, and the price discounts for regular varieties in Xiaoshao are enlarged. The price of carded 21S is 18,300 yuan/ton, and the price of carded 32S is 19,500 yuan/ton. The price of open-end spinning cotton yarn has dropped, and the shipment volume has declined slightly; combed high-fine yarn has directional demand transactions; the shipment of medium and high-count cotton yarn has not been good. A certain factory’s compact spinning C60S high-end price is 27,200 yuan/ton, and the compact spinning JC80S price is 39,000 yuan/ton. Cash per ton includes tax, and there are still discounts in actual negotiations; the price of JC60S in Jiangsu and Zhejiang is 28,300 yuan/ton, and the price of 100% long-staple cotton combed and compact 80S is about 50,400 yuan/ton.
​1. Cotton trends diverged between the internal and external periods, and the market’s focus is still on China’s reserve dumping policy
Since December 2015, spot cotton prices in the international market have remained strong, while Zheng cotton has fluctuated and declined at low levels, deviating from international cotton prices and domestic spot trends. Although China’s consumption has shrunk recently and the demand for imported cotton has dropped sharply, U.S. cotton production has been significantly reduced and ending stocks are at low levels. Consumption outside China has increased, and India’s purchase and stockpiling has supported its domestic and international cotton prices. The above factors support the spot futures in the international market. Cotton prices remain firm. But on the other hand, the progress of U.S. cotton signings continues to be lower than the same period in previous years, and the sales situation is not good; the global cotton oversupply situation has not fundamentally improved, and the overall fundamentals are doing more harm than good, and the future trend will still put pressure on cotton prices.
Zheng cotton futures showed a volatile downward trend and deviated sharply from the spot price. Zheng Cotton 1601 contract fell sharply, falling below 10,000, hitting a 7-year low. Although the global cotton market has shown a supply shortage this year, there are no obvious positive factors to support the market due to high ending stocks and weak downstream consumption. Short sellers are firmly bearish on Zheng cotton based on the fact that selling reserves will be in line with the international market, and global cotton prices will be strongly impacted. Zheng cotton therefore deviates from the trend of international cotton prices. The main 1605 contract is a thousand yuan discount to the domestic spot cotton price. Although near the end of the year, market trading willingness has weakened and Zheng Cotton’s decline has slowed down. However, short sellers dominate the market and the upward resistance is relatively large. Zheng Cotton has shown an inability to rebound. However, when the market has actually formed a thousand-yuan inversion, the downward space of cotton prices is also limited, and the divergence pattern between futures and current prices will surely be corrected in the future. The pace and price of cotton reserves will become important factors affecting the future trend of cotton prices.
2. Downstream operations are difficult, and the market’s “cold winter” will continue
The supply of cotton fabrics is sufficient, prices have fallen slightly and shipments are mainly sold on credit, and funds are slowly withdrawn. Weaving manufacturers are not operating well, with the average operating capacity remaining at 60-65%. Cotton weaving manufacturers are slowly digesting gray fabric inventories, with average inventories of about one month, showing slight pressure. Companies mostly focus on debt collection. Some manufacturers reported a slight decrease in winter orders and a rise in spring fabric orders. As the end of the year approaches, some textile mills are in a semi-stop state of operation, and some manufacturers have taken holidays in advance. The sales of cotton twill, gauze card, combed anti-feather gray fabric, corduroy 16 and 21 specifications and brushed fabrics on the market have increased; domestic sales of home textiles have been slow, and foreign trade export orders have shrunk.
At present, the operation of textile enterprises is still sluggish, and there is a “syndrome” at the end of the year. First, orders from textile enterprises are still mainly small, short, and few, and the inventory of finished products has increased. Some larger textile enterprises have inventories of more than 30 days; second, raw materials, Finished products occupy funds, and it is difficult to get back the loan payment before the end of the year. In addition, loan repayment, workers’ wages and other expenses have increased the financial pressure; third, many textile companies are operating at a loss, and it is difficult to pay wages in full on time, and many migrant workers have returned home early. , this year textile companies are facing a shortage of labor ahead of schedule. Market analysis shows that due to the increased pressure on production, sales and profitability of textile enterprises, it is expected that the market will be difficult to change the weak situation around the Spring Festival. Manufacturers will still “buy as you use” in raw material procurement and adhere to “order production according to sales” in sales. The market’s “cold winter” will continue.
On the whole, the overall operation of textile enterprises is currently weak, the number of downstream orders has not seen a significant improvement, and the price of cotton yarn continues to fall. In addition, under the pressure of difficult sales, tight funds, and meager profits, in order to maintain the capital chain, cotton mills generally adopt measures to reduce inventory by reducing production capacity. The number of small enterprises shutting down is increasing day by day, and the amount of cotton used is gradually decreasing. In addition, there are sufficient cotton resources in the market, and we are not optimistic about the future price, and expectations for the later rotation of cotton reserves have increased. Compared with previous years, the number of companies that have sufficient cotton for the New Year has decreased significantly.