The Gradual Downward Trend Of The Lower Reaches Of Zhengzhou Cotton Limited.

Under the good expectation of Sino US trade consultation, Zhengzheng cotton began to pick up in January. Compared with the low point in December, the main contract has increased to a maximum of 720 yuan / ton, the longest and longest rally since last August. At this stage, China and the United States have actively negotiated good expectations for the market. However, with the advent of holidays, the buying and selling activities of the spot market will be affected. After the holiday, with the resumption of downstream construction, Zheng cotton still has a driving force. Sino US trade friction is still a major factor affecting market expectations for downstream demand.

Sino US trade frictions consultation and downstream replenishment, cotton prices rebound

After G20, trade friction between China and the United States eased, and the two sides agreed to complete negotiations within the next 90 days. This easing signal has restored some pessimism in the country, and the decline of Zheng cotton has slowed down. In early January, the US trade delegation visited China and held trade consultations with China at the ministerial level. According to the Ministry of Commerce issued a document, this consultation is more successful. Although the two countries did not have clear conclusions in this year's first consultation, the two sides have confidence in the market's positive attitude towards trade frictions. At the invitation of the US finance ministers and trade negotiators, Vice Premier Liu He will visit the United States on from January 30th to 31st and consult with the US side on the economic and trade issues of the two countries, and jointly promote the implementation of the important consensus of the two heads of state. The deadline for the two countries to reach an agreement is March 1st, and the market has good expectations.

Near the Spring Festival, cotton enterprises have stockpiling demand, and cotton purchases and sales have improved slightly. According to the national cotton market monitoring system procurement willingness survey results, in early January, 64.6% of enterprises preparing to purchase cotton, 1.7 percentage points higher than the annulus, 4.9% of those who did not plan to purchase cotton, and 2.5 percentage points lower than the annulus. Due to the uncertainty of Sino US trade frictions, the willingness to purchase has declined compared with the same period last year. In addition, sales data also show the downstream replenishment. As of last week, the weekly sales rate of new cotton sales in China narrowed narrower than that in the previous week. The decline was the first to converge after expanding for ten weeks.

Affected by the downstream purchase, the spot price of cotton stabilized or even slightly increased. The 328 cotton price index rose 99 yuan / ton compared with the beginning of the month, and the pick-up price of the 328 cotton picking machine in Xinjiang increased by 50 yuan.

Lower prices to inventory has achieved results.

According to the data, PMI increased by 1.37 percentage points in December, which lasted for third months below 45. Among them, the cotton yarn inventory index was 61.97, a slight increase in the ring ratio, the highest level in nearly 16 months; the new order index was 38.41, a slight increase of 0.72 percentage points in the annulus, and below 40 in the three consecutive month. Overall, PMI in December was the lowest in the past three years, and the sub index was also the worst performance in the last three years.

After the escalation of Sino US trade frictions in September, the trend of domestic yarn and grey fabric operating rate was obvious. At the beginning of December, after the news of the Sino US trade slowed down, the domestic yarn and grey fabric started to stabilize. However, due to the lack of confidence in the market, the price of raw materials in the upstream is weak, the purchase and sales are slack, the downstream goods are not smooth and the prices are sluggish. The operating rate is once again stable after three weeks. In mid January, with the approaching of the Spring Festival, the operating rate further declined. According to China cotton textile information network data, as of Tuesday, the yarn utilization rate index was 58.8, and the grey cloth utilization rate index was 53.8, which was significantly lower than that of the same period last year. Since September, the yarn and grey fabric operating rate index has decreased by 7.7 percentage points and 6.7 percentage points respectively. Over the same period, yarn and grey fabric inventory index increased first and then decreased. 12 since the middle of last month, enterprises have achieved initial results in inventory, and domestic yarn and grey stock have begun to fall. As of Tuesday, stock index of yarn and grey fabric was 17.7 days and 28.9 days respectively, 2.6 and 1.7 days respectively, but still higher than the same period last year.

As the Spring Festival draws near, textile enterprises speed up the withdrawal of funds, further strengthen the inventory and further weaken the price of cotton yarn. Compared with the same period last month, the C32S yarn price index fell 200 yuan / ton.

Business inventories increased significantly, and sales pressure shifted later.

On the one hand, the initial business inventories increased substantially this year, and the supply of Chen cotton was adequate. On the other hand, Sino US trade friction affected domestic downstream demand, raw material demand was expected to decline, and procurement enthusiasm was not high. Two reasons lead to slow progress in new cotton sales and continuous increase in business inventories. Sales pressure after years should not be overlooked.

As of January 18th, the national sales rate was 32.4%, down 7 percentage points from the same period last year, which is 15.9 percentage points lower than the average in the past four years. Among them, the sales rate in Xinjiang is only 30.5%, down 8.5 percentage points compared with the same period last year. At the end of December, the national cotton business inventory was 4 million 960 thousand tons, a significant increase of 700 thousand tons, an increase of 16.4%. Since the beginning of this year, the monthly year-on-year growth has been increasing, the highest value in recent years.

The supply pressure in the spot market is large and the pressure on the futures market is not too much. Since November last year, Zheng cotton warehouse receipt has risen almost unilaterally. Close to the 01 contract delivery, zhengmian warehouse receipt has a slight drop, and then began to rise sharply. Up to now, the amount of warehouse receipts has been generated at 640 thousand tons, with an effective forecast of 80 thousand tons. The trade friction between China and the United States has increased the probability of big fluctuations in Zheng cotton, the light buying and selling in the spot market, the change of purchasing habits and the convenience of warehouse receipt generation are the main reasons for producing large quantities of warehouse receipts.

Cotton business inventories hit a new high in recent years in December

The market has good expectations for the final agreement on Sino US trade, which will support cotton prices both at home and abroad. At this stage, the replenishment of raw materials is coming to an end, and downstream capital is still in progress. Near the Spring Festival, textile enterprises embark on holiday issues. It is expected that the demand for the year will be improved. Years later, with the downstream one after another, Zheng cotton will be out of the cold winter. In the early March, China and the United States will reach a final agreement on trade frictions. We are cautiously optimistic about this.