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Soaring Cotton Prices Have No Harm To The Textile And Garment Industry.

2010/9/28 9:42:00 74

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Cotton Prices Are Soaring And There Are No Profits.

Entering September, domestic

Cotton price

Like rocket ascension, it soared 15%, the 328 level cotton index rose from 18002 yuan in September 1st to 20644 yuan, the second highest point in history (the first high from 96 years of cotton price madness), and the foreign cotton price (Cotlook index) launched in the same period, from 94.1 cents per pound to 108.5 cents / pound, and also 15% (Chart 1,2).

Although we also anticipate the rise in cotton prices, this increase is far more than we expected.

Commentary

The so-called global cotton supply and demand change is expected to be the cotton price.

Skyrocket

The key reason is: in the domestic, due to weather factors, cotton picking has been delayed for about 2 weeks, and the quality has declined. India has suspended cotton exports and Pakistan cotton has been affected by the international market. These factors lead to the market's view that the global supply and demand of cotton will be reduced to the reduction of inventory in the coming year, and the price will rise. However, the market seems to ignore the positive factors that increase the planting area of the United States by 19%. Moreover, China's cotton has not been fully picked yet, and the output is still very uncertain. At present, the so-called global cotton supply and demand change is somewhat similar to that of the crude oil price from 100 yuan / barrel to 147 U.S. dollars / barrel.

Cotton already has certain financial attributes.

We believe that capital is the key reason for the recent surge. Domestic cotton has always been skyrocketing and plunging. The key reason is that the processing industry, circulation sector and cotton textile enterprises are always looking forward to low price cotton and profit making, resulting in sharp changes in the inventory of enterprises and society, resulting in a sharp rise and fall in cotton prices.

The latest skyrocketing crash occurred in 03 -04, and cotton prices rose from 12000 to 18000 yuan in half a year and fell to 10000 yuan in half a year.

One of the results is that the central storage cotton company has just been established, that is, the loss is one billion yuan.

This year, not only has the funds still been involved in cotton speculation in the past year, but also new funds have been taken part in, and the most obvious indication is that it ignores the national policies. The funds can be completely stockpiling in the spot market and gain huge profits in two cotton futures markets in China and the United States.

Under the so-called market expectations and capital participation, the soaring cotton prices become inevitable.

This year's demand for cotton textile products at home and abroad is relatively strong. This is the main reason for pushing up cotton prices: in 1-8, textile and garment exports increased by 125 billion 200 million, up 23.8% from the same period last year; in 1-7 months, the total volume of domestic textile and garment wholesale and retail sales increased by 23.8%, and the growth rate basically reached the level before the crisis.

The rapid recovery of demand is also the main reason for the rise in cotton prices.

The rising prices of global agricultural products are raising the atmosphere of cotton prices rising. This year, global agricultural products continue to rise in price, of which cotton is in the lead, while China's cotton dependence on foreign countries is around 1/3, and international cotton prices boost domestic cotton prices, making cotton prices difficult to get rid of the impact of global agricultural prices; {page_break}

Cotton prices skyrocketed

Hundred pests

But there is no benefit: because the new cotton has not yet been listed in large quantities, and the cotton price has skyrocketed. Even if the cotton price is running high in the future, cotton spinning enterprises will not be able to store large quantities of cotton at a low price at the end of this year and early this year, so that they will get a higher profit in the earlier stage of operation this year.

Cotton prices will rise rapidly, and will soon be pmitted to downstream clothing, which will be a global consumer's pay. Clothing prices will continue to rise, and the entire textile and garment industry will be damaged when the global economy has not yet recovered. If cotton prices fall, it will not be possible to reproduce the 04 year's tragedy. Before the cotton price stabilizes, the efficiency of cotton spinning enterprises will still decline. If cotton prices are flat, the possibility is too small, because it is never seen in cotton history, and the country and enterprises have always dreamed of it.

Cotton prices are expected to be significantly more difficult: cotton has certain financial attributes and huge financial resources, so it is expected that cotton prices will be more difficult, which is also emphasized repeatedly in our weekly raw material price weekly.

Considering that the global economic crisis has not yet passed and cotton supply has maintained a relatively fast growth, we can only say that the cotton price is at the top of the region. The new cotton list will be launched in mid 10.

Investment suggestion

We have always been cautious about the prospects of textile and garment production and export enterprises, and think that their gross margins will be adversely affected by rising costs and appreciation.

We maintain the industry's "overweight" rating, mainly because we always value quality textile and garment retail enterprises, because these enterprises are brand enterprises, which can influence the adverse impact of the rising cost of digestion through product design, marketing and brand, thereby maintaining the growth of performance.

As for cotton production enterprises, such as Xin Nong, Xin Sai and Dunhuang seed industry, because of the rapid growth of seed cotton, the cost of enterprises has also increased simultaneously, which has brought uncertainty to the performance growth. We think they have trading opportunities.

The rise in cotton prices has directly led to the increase in the price of viscose raw cotton short staple, and the cost has increased, thus promoting the price of viscose. As viscose staple fiber is in the period of high speed release of production capacity, we believe that the price increase has limited effect on the improvement of enterprise efficiency, including Shandong Hailong, Ao Yang technology, Sanyou chemical industry (the plan of assets injection into viscose staple fiber production capacity has been approved by shareholders' meeting) and the viscose enterprises of Xinxiang chemical fiber have trading opportunities.