China'S Recent Issuance Of Quotas On Imported Cotton Did Not Cause Market Turmoil.

China has recently issued 400 thousand tons of additional imports.

The news did not trigger the market, only because the quota was a "processing trade" quota, not a "slippery tax" quota, and the current market was focused on the September opening and storage drama.

The so-called quotas for processing trade quotas is that quotas enterprises can achieve zero quotas quotas. However, the general enterprises can only use the quotas to import cotton only if they have orders for processing trade. Therefore, the application of face to face quotas is relatively narrow and the circulation is limited.

Cotton futures from the Zhengzhou Mercantile Exchange to go out of the current dull situation may have to wait until September when the national cotton purchase and storage scale is opened. Considering the current weak demand and the huge domestic cotton price gap, it is still unknown how much the market will generate.

"This quota is not worth the money. It is processed by imported materials. Now the export orders are few, and the market price of the quotas is 600 yuan (per ton). No one wants it." a large domestic cotton trading enterprise said. "We are waiting now, waiting for the purchase and storage to start."

The traders also said that before the purchase and storage began, as a spot business of cotton enterprises, they could only "do their best." at this stage, the idea of operation is to buy near contracts, sell forward contracts, or buy spot goods, and sell futures.

China is the largest importer of cotton in the world, but the price difference between domestic and foreign cotton is as high as several thousand yuan, because China implements a cotton import quota system. If there is no quota, low price foreign cotton can not enter the Chinese market. At present, the price of sliding cotton quota has risen to around 4000 yuan per ton.

However, the domestic high priced cotton is not popular, and the cotton spot market is particularly light. It can only wait for the purchase and storage, and the performance of the futures market has been suppressed.

This year, cotton prices at home and abroad have been low for several years due to sluggish economic demand. The main contract of Zheng Shang cotton futures was dragged down to 19575 yuan on Thursday by the release of reserves, which has fallen by 15% compared with the peak in February. During the same period, the ICE cotton futures index also fell by 0.22% from China's release reserve, which was more than 20%. higher than the February high.

However, at home and abroad, the cotton price difference of more than 2000 yuan still attracts many traders' desire for speculation, but the result is: the cheap cotton in China's port bonded warehouse is piling up. On the other hand, under the background of economic downturn and weak downstream demand, cotton spinning enterprises are suffering from double troubles. Many enterprises are suffering from imported cotton, and "no imported cotton will not start."

Market participants say that although the quota system of cotton imports in China is designed to protect the interests of cotton farmers in China, the high cost of Chinese cotton mills has already hurt the downstream of the entire cotton industry chain and has seriously weakened its international competitiveness. Foreign trade orders under the current crisis have shifted to countries such as India and Turkey. On the contrary, Chinese enterprises are also beginning to import cotton yarns to reduce the cost of cotton by curve.

Now the focus of the state and the market is in the storage. With the closing date of the purchase and storage in September, the cotton futures price of Zheng Shang is close to the closing price, which gives many investors more confidence.

"To collect and store immediately.

It must be upward, and there is an upward pulling force, which is a good basis for entering the market. "Green futures cotton analyst Ma Zhan said that in recent months, futures prices should gradually be close to 20400 yuan / tonnes of State purchasing and storage prices.

Although no obvious signs of capital inflow into cotton futures have yet been seen, in the Chinese futures market, which lacks investment themes, there is still an investment opportunity.

However, China is considering that the release of cotton reserves may have a greater impact on the market. This measure will no doubt suppress the rebound in the futures market. By this news, the reaction of ICE (Intercontinental Exchange) cotton is down.

Ma believes that the power to buy and store domestic cotton futures prices may be limited. Once cotton futures prices hit the national reserve price, it will trigger a huge set of guarantee plates, which will turn prices down. Therefore, the price of storage and purchase materials may have been capped for Zheng cotton. He also suggested that investors should focus on short-term investment, especially in controlling risks.

The current policy may be more likely to affect China's cotton prices than supply and demand. The state still says it will "open and limit" to buy and store cotton as it did last year, but pessimists are still skeptical about the effectiveness and enforcement of the upcoming storage and purchase, thereby weakening the upward trend of cotton futures.

After all, this year's market situation is different from that of last year. In the face of the fundamentals that have already been more than enough, if this year China is still open to buy cotton, it will make the Chinese market's cotton reserves to 7 million 500 thousand tons, which is equivalent to half of the world's stock.

A senior R & D director of a large Futures Company also stressed that although the purchase and storage may bring a wave of market prices, but the purchase and storage in fact can not bring about a fundamental improvement in the fundamentals. Therefore, the purchase and storage may improve in the coming months, but cotton prices may fall more.

The investment manager of a futures private equity fund in Shanghai said that more recently, the Chinese futures market was more wait-and-see. Most of the operations were "short positions, short term operations". At the moment, there was no intention to intervene in the cotton purchase and storage. In his view, the uncertainty of the policy made the whole market lose the investment value just like gambling.

Cotton futures prices fell on Thursday, and manufacturers continued to sell at the top of 76 cents, as the market digested the Chinese government's possible sale of up to 15% stocks of cotton in the next month, which could lead to oversupply in the already saturated cotton market.

Sources told Reuters that China's development and Reform Commission has recently issued an additional 400 thousand tons of imported cotton quotas to ease the cost pressures of textile enterprises. China will consider putting in the national cotton reserves in September, and plans to throw 1 million tons of state treasury cotton around.

According to CotLook, by July next year, the world's cotton supply will exceed 3 million tons, due to increased production and declining demand in China.

China Customs announced the final data of import and export of bulk commodities in July.

405 thousand and 800 tons, an increase of 158% over the same period, while imports of cotton increased 133% to 3 million 459 thousand tons over the same period in 1-7 months.