Cotton reserves are in sight. Is the rise in cotton prices fake?
Abstract: Recently, domestic cotton prices have continued to rise, causing concern and vigilance in the industry. There are several main reasons why cotton will rise sharply and rapidly after the new year: Mainland textile companies have low raw material inventories. Recently, the author has contacted some textile factories in Shandong, Hebei and Jiangsu and found out that many companies have resumed work in advance, and most of them are at full capacity. But a problem plagues companies – raw material inventories are generally low. Taking a cotton textile factory in Shandong as an example, the cotton inventory can last for 9 days.
Recently, domestic cotton prices have been rising, causing concern and vigilance in the industry. There are several main reasons why cotton will rise sharply and rapidly after the new year:
, Mainland textile companies have low raw material inventories. Recently, the author has contacted some textile factories in Shandong, Hebei and Jiangsu and found out that many companies have resumed work in advance, and most of them are at full capacity. But a problem plagues companies – raw material inventories are generally low. Taking a cotton textile factory in Shandong as an example, the cotton inventory can last for9days, and the chemical fiber inventory can last for17days. There is a huge gap between the two, and companies need to replenish their inventories.
In the entire southeastern coastal provinces, most of the raw material inventories of small and medium-sized textile enterprises are between 9-15 days, which is lower than in previous years b>1-2 days; while the raw material inventory of large and medium-sized textile enterprises is around20 days, exceeding30days. As soon as the Spring Festival holiday ended, various companies faced a wave of concentrated demand for restocking, which also gave certain support to upstream cotton.
Second, market speculation. This hype is mainly reflected in two aspects. On the one hand, there is speculation in the electronic trading market, and some social hot money enters the futures market, triggering buying orders and price speculation by bulls. On the other hand, some traders and ginners are eager to liquidate their stocks, and they have also spread the word, creating an atmosphere of “the market is extremely short of cotton, cotton is rising rapidly, and you will benefit early if you start early.”
However, in the entire process of cotton rising, one of the biggest determining factors is: regardingthe substantial reduction in cotton production in 2016, Cotton demand will rise in 2017, and under tight supply and demand, cotton will show an upward trend in the future. There is a huge gap between supply and demand in the market, and cotton prices have to rise. Is that true?
Short-term cotton supply is indeed tight. According to feedback from the Xinjiang Corps and local cotton gins, the current cotton sales progress is between 70-90%, and the overall progress is faster than the same period last year. Especially XPCC cotton, with its quality, quantity and channel advantages, most of it has been sold out.
During the Spring Festival, almost all automobile transportation is suspended, and only railway transportation is available. As a result, the supply of Xinjiang cotton in the mainland market is slightly tight. Many large cotton merchants and traders have reported that due to transportation conditions, many orders are actually difficult to complete.
In the long run, cotton supply and demand can remain stable. The cotton reserve rotation will begin in March and will last until the end of August (without special circumstances). Calculated based on the wheel reserve of 33thousand tons per day, the total wheel out volume in 55 months will be More than300tons, the gap of 276.3tons will undoubtedly be made up.
But there are still variables in the market. The main reason is that during the storage rotation period, not only textile companies are eligible to bid, but traders are also eligible. In this way, if traders rush to buy and hoard, the market may have a phenomenon of “the more the state reserve cotton is auctioned, the higher the price will be.”
To sum up, 2016/17, is there less cotton in China? Stop shouting! But if the policy is strong enough to fill the market gap immediately, there will be a lot of cotton. The market outlook is really ever-changing, making it difficult for people to figure things out.
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Cotton reserves are in sight. Is the rise in cotton prices fake?
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