Cotton reserves are in sight. Is the rise in cotton prices fake?
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 learned about the phone calls of some fabric factories in Shandong, Hebei and Jiangsu. It is found that many companies have resumed work in advance, and the majority 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, and the chemical fiber inventory can last for 17 days. There is a huge difference between the two, and the company needs to restock.
In the entire southeastern coastal provinces, the raw material inventory of small and medium-sized textile enterprises is mostly 9-15 days, a decrease of 1-2 days compared with previous years; while the raw material inventory of large and medium-sized textile enterprises is about 20 days, exceeding There are very few companies that have 30 days. 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 rumors, creating an atmosphere of “the market is extremely short of cotton, cotton is rising rapidly, and if you start early, you will finish it early.”
However, in the entire process of cotton’s rise, one of the biggest decision-making factors is: regarding the sharp reduction in cotton production in 2016, the increase in cotton demand in 2017, and the tight supply and demand situation, 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 really 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 reserve cotton rotation will start in March and continue until the end of August (barring extraordinary circumstances). Calculated based on the rotation reserve of 30,000 tons per day, in 5 months, the total rotation volume will exceed 3 million tons, 276.3 There is no doubt that the gap of 10,000 tons will be filled.
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, in 2016/17, will there be less domestic cotton? 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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