Cotton Price Inflation Survey: What Is The Benefit Of Alternatives?

Due to climate and planting area reduction, production reduction is expected to enter the 2010 cotton year. cotton Prices are rising rapidly, seed cotton purchase price, dumping price and spot price. Cotton yarn Prices and so on in a short span of one and a half months, the increase of 20%-40%, hit a record high.

Cotton prices soar and push cotton forward Succedaneum The demand for polyester fiber increased and the price increased. Affected by this factor, Huaxi Village (000936), one of the most important beneficiaries of the two city's polyester staple fiber companies, launched a strong filling market in the middle of October 11th. When the share price was 7 dividends per 10 shares, the 11 day to 20 days, the 8 consecutive trading days rose and 20 days remained low.

However, insiders pointed out that although supply is insufficient as a fundamental factor, it is not enough to support cotton prices so skyrocketing and speculative speculation also accounts for a large proportion. With the improvement of climate and the adjustment of the state, the foundation of cotton price rise is weakening. On the evening of 19, the central bank announced interest rate hike again after three years. This liquidity tightening signal has a greater impact on the movements of idle capital. Once the idle capital is withdrawn, the policy of cotton production will be adjusted or adjusted, and cotton prices will rise or postpone.

On the downstream industry level, the major cotton producers are mainly the home textile industry with high price. The reduction of cotton supply has little impact on the garment industry. Therefore, from the industrial point of view, the substitution benefits of cotton substitute such as polyester staple fiber are lower than expected.

The secret of soaring cotton prices

Since the financial crisis in 2008, the price of cotton has been ups and downs. In November 2008, the Zhengzhou futures exchange's cotton futures fell to a minimum of 10180 yuan / tonne. Thereafter, with the gradual recovery of the global economy, it climbed to the platform of 13000 yuan / ton, and the cotton futures price rose to 16000 yuan / ton level in 2009 September, and it remained until August this year.

In July, cotton prices continued to move slowly upward. By the end of July and early August, the domestic cotton production cut was expected to become stronger and the price was rising faster. However, spot prices were still higher than futures prices. Wang Congying, an analyst with China Securities Futures, told reporters that domestic cotton growers' confidence was frustrated and their planting area was reduced due to the low cotton price in 2008. "The annual planting area of 80 million mu is the domestic cotton safety warning line, but this year, the domestic planting area is only 70 million -7400 mu, which has not increased since 2009, while the current domestic unit production level has been in the forefront of the world, and the space for raising the unit yield is very limited, which has led to the expected reduction in cotton production." Statistics show that in 2009, China's cotton production was 6 million 400 thousand tons, a decrease of 1 million 100 thousand tons compared with 2008, a drop of nearly 15%. In September 29th, China Cotton Association estimated that the total output of cotton in China was 6 million 700 thousand tons, a decrease of 260 thousand tons from the previous month.

Entering September, the main cotton producing areas in China were in early winter and more rain and snow. Wang Congying said, "the quality of cotton harvested at the autumn and rainy season is guaranteed, and the rain and snow weather not only directly affects the quality of cotton, but also greatly affects the cotton harvest, pushing the progress back, and some cotton may rot in the ground." At the same time, 30% of domestic cotton imports depend on imports, but there is no significant increase in international cotton production this year.

In the context of the expected reduction in production and the demand will not drop, hot money in Jiangsu, Zhejiang and other regions began to pour into the main cotton producing areas such as Xinjiang. The imbalance between supply and demand and capital push directly led to the boom in cotton spot price since September. The cotton futures quotas of Zhengjiao exchange rose from the lowest price of 17550 yuan / ton in September 1st to the highest 26425 yuan / ton in October 14th, the biggest increase being 50.56%, and the price per ton exceeded 2008's highest point of nearly 10000 yuan. In October 18th, China's cotton grade 1 to the factory price was 25577 yuan / ton, the 2 level was 24946 yuan / ton, the 3 level was 24256 yuan / ton, 4 level was 23724 yuan / ton, 5 grade 22335 yuan / ton, compared with September 1st, the price increase was close to 40%.

"We saw 26000 yuan / ton in the early stage, and because of the rigid demand of home textiles and other industries and the promotion of capital, we believe that cotton prices will remain high, and it may be difficult to fall back in the year," Wang Congying stressed. And Hongyuan futures analyst Wang Yong also said that based on the shortage of cotton supply, although the national policy regulation expectations are gradually increasing, "we believe that the policy of the state" far from hydrolysis can not be nearly thirsty, "cotton kinetic energy has not failed.

The rise in cotton prices has led to an eye-catching performance of the relevant cotton listed companies. The new race stock (600540) (600540.SH), which accounts for more than 50% of lint income, is the most influential cotton producer listed company whose performance is affected by cotton price fluctuation. The company's share price has been driven by cotton price rise, and the biggest increase since the end of September has exceeded 30%. And new cotton development (600359) (600359.SH), Nong Nong share (600251) (600251.SH), Dunhuang seed industry (600354) (600354.SH) have been continuously pulled up after 20% of the lint income, accounting for only 3.74% of the total cotton income (A) (000726) (000726.SZ) is also gratifying. However, a brokerage research indicated that the decline of cotton quality due to climate and other reasons is the most important problem in the cotton price reduction expected, which will have adverse effects on cotton planting enterprises to a certain extent.

Wang Yong disclosed that with the rise of cotton prices, the current acquisition of cotton enterprises is prudent, and the number of enterprises stopping and waiting is increasing. Textile enterprises are difficult to accept the new processing lint with high price and high moisture regain. Despite the rising price of yarns, the sales situation has not kept up. "More and more small and medium-sized textile enterprises have been cut down or stopped production." Wang Yong said.

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What is the benefit of alternatives?

The impact of soaring cotton prices on textile enterprises has led the industry to turn its attention to alternatives. Benson Zhang, an analyst at Guoxin Securities, said that the blending of cotton, viscose and polyester staple fibers can be substituted in a certain range. The textile enterprises adjust their usage ratio according to the needs of customers and the ratio of price to price, so the three have a certain substitution relationship. The rise in cotton prices will drive the growth of polyester staple and viscose staple products.

However, viscose staple fiber raw materials from cottonseed cottonseed are left on the part of cotton seeds attached to the short fiber, that is, cotton lint, so the viscose price is greatly affected by cotton, viscose staple fiber enterprises are facing rising cost pressure; and polyester staple fiber production PTA, B two alcohol products are petrochemical products, prices are affected by crude oil prices. At present, crude oil prices are relatively stable, do not appear to rise sharply, polyester staple fiber cost pressure is not large. Therefore, the most obvious substitute for this cotton price rise is polyester staple fiber, and it has obvious price advantage.

Since the second half of 2008, along with the continuous rise of cotton prices, viscose staple fiber prices are also rising, the price difference between polyester staple fiber and cotton and viscose staple fiber is widening. At present, the price difference between cotton and PET staple has exceeded 10000 yuan / ton, reaching the high point since 2002.

China Merchants Securities (600999) Qiu Xiaofeng pointed out that in the past 2003-2009 years, the apparent consumption of PET staple fiber / cotton has a positive correlation with the price difference of cotton polyester staple fiber, and the data confirm the substitution relationship. "Conservatism is expected to replace the proportion of polyester staple fiber 5%, and the production of polyester staple fiber will increase by 18% over the same period last year."

In fact, the rise in cotton prices has pushed up the price of PET staple fibers. Huaxi Village's secretaries general told reporters that "the price of polyester staple fiber in 7 and August this year was 7000-8000 yuan / ton, driven by the rise in cotton prices, and began to rise slowly in September. By October 15th, it has risen to 12000 yuan / ton, while the cost of raw materials in this company is relatively stable during this period." "If cotton prices continue to be strong, they will continue to drive up the price of PET staple fibers," he stressed.

In addition, the starting rate of polyester goes all the way. Qiu Xiaofeng said that the output of polyester in January 2009 was around 1 million 300 thousand tons, while the output in August 2010 was 2 million 250 thousand tons. The monthly output of polyester has reached a record high, and the price of polyester staple fiber has been rising.

It is worth noting that the viscose staple fiber is also rising in volume and price. But unlike PET staple, the cost of viscose staple fiber is also rising. Xinxiang chemical fiber (000949) (000949.SZ) secretaries general said that the increase in cotton prices is beneficial to the company, but the price of raw materials is also rising while the price of products is rising.

"Huaxi Village is the largest variety that benefits cotton price rise," Benson Zhang said. According to the China Daily, Huaxi Village has 200 thousand tons of polyester staple fiber and 100 thousand tons of polyester chip production capacity. In the first half of this year, the textile and chemical fiber industry accounted for 74.75% of Huaxi Village's main business income, of which polyester staple achieved 487 million yuan, accounting for 38.29%.

Affected by the recent rise in cotton prices, some cotton yarn companies began to increase the proportion of polyester staple fiber. The single ton gross profit of Huaxi Village polyester staple increased from 500 yuan to 2000-2500 yuan / ton, and the gross profit of polyester chip was also 1200-1500 yuan / ton, and the annual gross profit of polyester staple fiber and polyester chip business was about 550 million -6 billion yuan.

Qiu Xiaofeng also revealed that the operation rate of Huaxi Village polyester staple fiber has increased from 75% in the first half to 100%. Recently, polyester staple fiber has risen by 2000 yuan / ton, corresponding to gross profit 2100 yuan, the product is up 1000 yuan / ton, EPS is thickening 0.15 yuan, and the EPS of 2010-2012 years is expected to be 0.21, 0.41 and 0.43 yuan respectively.

In addition to Huaxi Village, S (600871.SH), one of the largest production base of modern chemical fiber and chemical fiber raw materials in China, has also benefited greatly. The largest increase since September 30th has reached 23.62%. The proportion of polyester products accounted for less than 20% of the Jiangnan high fiber (600527) (600527.SH) performance slightly less, and the stock price fell short after high inflation.

And the viscose staple fiber listed company Australia ocean science and Technology (002172), Xinxiang chemical fiber, Shandong Hailong (000677), Jilin chemical fiber (000420), Nanjing chemical fiber (600889) and so on, although also rose, and some brokerages will also be recommended as the beneficial stocks, but viscose staple fiber and polyester staple fiber their different substitution effect still can not be confused, the market after a brief chase up quickly calm, the stock price dropped sharply to the pre rising level.

How long can cotton prices skyrocket?

Although the boom in cotton prices has already had an impact on related industries and companies, insiders pointed out that the sustainability of cotton prices will still face many variables in the future.

First of all, since the end of September, the climate of cotton producing areas such as Xinjiang has begun to improve, which is good for cotton picking. The latest monitoring of China Cotton Association shows that cotton production is weaker than expected: as at the end of September, the total output of cotton is estimated to be 6 million 640 thousand tons, compared with 2.3%. According to survey data from the Ministry of agriculture and Statistics Bureau, the cotton production is reduced by about 4% compared with the caliber. Global cotton harvest, production increased by more than 3 million tons, supply and demand are basically balanced.

The rise in cotton prices has led to confusion in the industry, which has also attracted the attention of relevant state departments. After the national cotton storage has been put into operation many times, in October 13th, the China Cotton Association also held a meeting of the chamber of Commerce to remind the backbone enterprises in the industry that they must not participate in malicious speculation or bid up prices. On the 14 day, the national development and Reform Commission convened a joint meeting on cotton macro-control, emphasizing the joint efforts of various departments to rectify market order and severely crack down on malicious speculation and other disrupting market order.

"The stability of cotton prices and even the decline do not need to wait until the next year's cotton supply and demand recovery, only need to eliminate the market supply gap is expected to be able to", Wang Congying, an analyst with China Securities Futures, said, "once the production is expected to be resolved, and the new direction of hot money flows, then the soaring cotton price will lose speculation support." This mainly depends on the state's policy of encouraging cotton cultivation, including raising the purchase price and raising the income and enthusiasm of farmers. And the speculation nature of funds also determines that the price driving force itself does not have continuity. The 19 night interest rate increase or blow the bugle of idle capital.