Stock up on cotton! Opportunity or risk?
Is it an opportunity or a risk for textile companies to bet on cotton reserves?
Fabric companies have started operations one after another after the holidays, and cotton prices have risen rapidly. However, downstream yarn prices have risen significantly slower than cotton, and companies are facing greater cost pressure. As the time for cotton reserve rotation is approaching, many textile companies hope to reduce costs by purchasing reserve cotton. Is this an opportunity or a risk for textile companies to bet on huge cotton reserves?
At present, domestic fabric companies have expressed their hope that the cotton reserves will be rotated out as soon as possible to alleviate the current urgent need to rise in cotton prices. In mid-February,
The sales price of “Double 29” and “Double 30” hand-picked cotton from Northern Xinjiang in Hebei is around 16,900 yuan/ton, and due to the limited supply, dealers require cash settlement and do not accept credit. Some companies said that at present, the raw material price of carded 40S cotton yarn is 17,000 yuan/ton, which translates into a cotton yarn cost of about 24,300 yuan/ton, while the price of 40S is 24,400 yuan/ton-24,500 yuan/ton, and the profit of spinning yarn has been compressed to 100 yuan/ton-200 yuan/ton. If cotton prices continue to rise, the risk of corporate losses will increase.
In terms of cost, of course the opportunities outweigh the risks. The bottom price of reserve cotton in 2016 is about 13,000 yuan/ton, and the price after excluding discounts is about 11,000 yuan/ton. Some reserve cottons with poor indicators even have prices below 11,000 yuan/ton after discounts. Among them, the color will be graded as It’s awesome, but it doesn’t hinder the company’s normal production and use. In fact, for fabric companies, color indicators have far less impact than cotton length and horse value. 2017 is no exception. Especially when the price of commercial cotton rises rapidly, the price of cotton reserves stored for many years becomes even more attractive.
Some companies also said that there are certain risks in relying entirely on reserved cotton for inventory. For example, this year almost all textile companies are waiting to bid for cotton reserves. The situation of too many people and too little is to raise the price of cotton reserves for rotation; secondly, it will take at least a week from the auction to the delivery of cotton reserves. If there is an emergency, the raw materials The time to arrive at the factory will be delayed, and the company faces the risk of insufficient raw materials. In addition, the early bidding for reserve cotton is fierce, and whether you can bid for it is also a risk. Judging from various factors, betting on cotton reserves in the early stage involves both risks and opportunities. How to manage the inventory is very important.
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