Cotton Market Reappears "2008 Crisis" Exceed 70% Textile Enterprises Stop Production

Step-by-step

"80% of the small and medium-sized textile enterprises in Dezhou are in the state of limiting production and shutting down production, and almost all textile enterprises are in a predicament."

Ma Junkai, Deputy Secretary General of the cotton association of Dezhou, Shandong, told the China Times newspaper on the morning of August 12th that the spot price of domestic cotton fell from the 32000 yuan / ton of the highest this year to the State purchasing and storage price (19800 yuan / ton), which made the impact on textile enterprises more than that in 2008.

"Because of the lack of signs of recovery in the downstream textile industry, it is difficult to rapidly digest the upstream inventory, and cotton enterprises will increase their willingness to sell prices, and the domestic cotton prices will continue to decline sharply in the near future."

China cotton reserve management company said.

Cotton price roller coaster

The use of roller coaster to describe the fall in cotton prices is obviously very appropriate.

Cotton prices began to soar from September 2010 until March this year, and even reached a high level of 35000/ tons.

Cotton prices, which run high in cotton, cotton processing plants and spinning mills, are excited by the fact that buying or selling prices will not be the same.

"High point, high point" became the voice of all. Cotton growers also learned to understand cotton and sell, waiting for better timing.

But not for long.

Cotton fell from 34000 yuan per ton in February 17th this year to 3 yuan per day, and sometimes four thousand or five thousand days to 3 days.

Not only the spot price of cotton has plummeted, but also in the futures market, cotton prices have failed.

This reporter noted that on the Zhengzhou Mercantile Exchange, the 1109 contract of cotton fell from 34000 yuan / ton in February to 21000 yuan / ton, or nearly 40%.

In the international futures market, the price of futures in the New York Intercontinental Exchange in October reached a maximum of 164.64 cents / pound in April, and fell to 100 cents / pound at the end of July, the same as nearly 40%.

"The price of cotton yarn has fallen even worse."

Ma Junkai told reporters that 32 pure cotton yarn has dropped from 40000 yuan per ton in early March this year to less than 20000 yuan per ton, and 50% per ton in 5 months.

According to China cotton information network data, yarn inventory has been rising since November 2010, reaching 22.08 days in May, exceeding the 21.58 days in May when the financial crisis happened in 2008, and reached a record high in June, reaching 35.2 days, far higher than the 8.96 days of the same period last year, which is also far higher than the 21.67 days during the financial crisis in June 2008.

Meanwhile, as of the end of July, there were 1 million 350 thousand tons of cotton business inventories, up from 120 tons in the same period last year, much higher than 950 thousand tons and 900 thousand tons in 2008 and 2009.

Low price crush cotton enterprises

"Cotton prices are going up and down, which is a disastrous blow to the textile industry."

In Ma Junkai's view, this market is irrational, cotton farmers, spinning enterprises, downstream weaving factories, garment factories, printing and dyeing factories are busy storing cotton and cotton yarn.

Now, the lie of the cotton gap has been shattered.

Cotton price decline has reached as high as 10 thousand yuan / ton.

Some large enterprises have tens of thousands of tons of cotton, there will be hundreds of millions of losses, small businesses can not afford to carry on, will naturally go bankrupt, this is more severe than the impact of the financial crisis in 2008.

"The spirit of the whole people is terrible."

Tian Jiudong, general manager of Shandong Xiajin Dexin Cotton Industry Co., Ltd. said that he had been doing cotton for so many years and never encountered such a market. The strange cotton price made him feel a bit confused.

"It can barely be maintained."

Tian Wenhua, the general manager of Xiajin Tianrun Textile Co., Ltd., said that his own mill produced 40 thousand spindles annually, and the size of the song Lou town was the middle and upper level. "The whole market was very good when the price of cotton rose before, and all the prices could not be carried."

Tian Wenhua calculated an account to reporters. At the current price of 25 thousand and 500 yuan per ton, multiplied by 1.1 weaving rate, plus 6000 yuan of water, electricity and labor cost, the cost of one ton of pure cotton yarn needs 34 thousand yuan, while the price of 32 pure cotton yarn is only 32 thousand yuan, which has not yet calculated the cost of pportation and operation.

Because Tian Wenhua ordered some long-term cotton in August last year, the cheap cotton will be used together with the existing cotton, and some leftovers will be sold, even if it loses 1500 yuan per ton.

"There are more than 20 enterprises in the Song Town holiday, accounting for more than 70%."

In fact, not only Dezhou, cotton textile production capacity is ranked first in Shandong, but cotton spinning enterprises in the whole province, especially small and medium-sized enterprises, are in great difficulties. Some enterprises are in a state of shutting down production, limiting production or partially stopping production.

Xia Zhilin, President of Shandong Textile Industry Association, told reporters earlier that the production of the textile mill is cyclical, and that cotton usually has to be stored for about 3 months. The average price of the original cotton is about 29000 yuan / ton. Now the production will obviously cause losses.

Who will control cotton prices?

"The collapse of cotton prices has a direct bearing on the recent frequent price cuts in Wei Qiao.

As the weathervane of cotton price in Shandong, Wei Qiao's quotation has always been the reference object for many enterprises.

Ma Junkai said, of course, there is no lack of speculation in the futures market, which will affect the spot price.

Ma Junkai's Wei Qiao refers to the Wei Qiao textile Limited by Share Ltd, which has the capacity of 7 million 200 thousand spindles and ranks first in the textile industry of the country. Its annual consumption of cotton is about 1 million tons, accounting for about 10% of the total cotton consumption in the country.

This reporter noted that, with Wei Qiao textile sharply reducing the purchase price of lint cotton in July 15th, cotton prices suffered fifth downgrades in half a month, and the Zheng cotton index hit the biggest weekly decline since December 2008.

At the same time, the panic caused by it continued to spread, and cotton growers, cotton merchants and textile enterprises in the cotton industry chain were entangled.

Prior to April, Wei Qiao textile also lowered its bid 5 times in succession.

In the industry view, as the government's key monitoring of the leading enterprises, Wei Qiao textile quotations rise or fall, often not just a simple corporate behavior, at some time, also reflects the government's regulatory intent.

"By regulating and supervising the key leading enterprises to regulate cotton market, the wind from the government's heavy blow on agricultural products began last year."

An insider who does not want to be named thinks that the policy available to the cotton industry has long been exhausted for the cotton industry. At present, there are few reserves of cotton in the country's hands. Because of the high price of imported cotton, the import quota is of little significance. At present, the price of the imported cotton is nearly 4000 yuan / ton more than the cotton to factory price in the country.

"Today's cotton market is too unhealthy, and the relevant departments of the state should attach great importance to it."

These people said that this is not only related to the market downturn, but also needs policy support, including taxation, loans, exports and so on.