Plunge 11%! Who Is Controlling The Price Of Zheng Cotton? The Result Is Not Simple.

In May 20th, the main contract of Zheng cotton futures closed at 1909 yuan 13870 yuan / ton, compared with May 5th prices plunged 1730 yuan / ton, or 11%.

In the past half a month, what causes the decline of Zheng cotton futures price?

Despite the fact that most people in the industry have not been optimistic about cotton prices this year, they did not expect such a "sudden blow".

Will spearheads simply and rudely refer to Sino US trade frictions?

In May 6th, Trump suddenly expressed his dissatisfaction and pointed out that the negotiation process was too slow. In its special push, it announced that it would impose tariffs on the previous $200 billion cargo, and threatened to impose tariffs on the $about 300000000000 cargo. This blow had a strong reaction to the previously quiet market.

After that, China's hard response attitude also brought a very pessimistic expectation to the market, which led to a bigger worry for the downstream export orders.

What is the impact of Sino US negotiations?

At present, Sino US trade negotiations are bad. China, as a big exporter of textile and clothing trade, has a relatively large export volume to the United States.

Before Trump Fagafaga's 200 billion dollars involved in the downstream cotton consumption products are not many, but if the remaining more than 3000 plus tariffs, that is, all the textile and clothing are included, so that the domestic cotton downstream consumption will have a great impact.

According to the National Bureau of statistics, in 2018, the total retail sales of clothing, shoes and hats and knitted fabrics totaled 13706 billion yuan in the wholesale and retail trade above Designated Size, which was equivalent to 201 billion 500 million US dollars according to the exchange rate of 6.8.

In 2018, China's export of textiles and clothing totaled 276 billion 700 million US dollars, of which the share of exports to the US market was around 17%.

We can calculate the cotton consumption of China's cotton textile garments exported to the United States, accounting for about 10% of the total cotton consumption in China.

That is to say, if the United States imposed tariffs on the next about 300000000000 dollars, it would affect the consumption of cotton in China about 80-90 tons, so the price of Zheng cotton fell sharply after Trump's speech.

In addition, the US cotton prices plummeted, bringing pressure to the domestic market.

In addition to these, what is the price of Zheng cotton?

The escalation of trade frictions between China and the United States is an important factor in the decline of Zheng cotton. However, it is not an essential factor, but it has a crucial impact on the trend of Zheng cotton and the US cotton in the short term from the perspective of risk. It has been proved for a long time that Sino US trade friction is highly uncertain and unpredictable. Therefore, we need to pay close attention to the dynamic progress of Sino US trade friction.

1. What is the impact on China's textile exports?

(1) from the table below, we can see that in the past few months, the total volume of clothing imports from China was stable during the Sino US trade negotiations. In the second half of 2018, China's clothing exports to the United States performed well, while in the first two months of 2019, it increased.

(2) the real reason for the decline of China's textile and clothing exports is the weakness of the global economy:

According to customs statistics, in April 2019, China exported textile yarn, fabrics and products 9 billion 788 million 900 thousand US dollars, down 6.9% compared to the same period last year. In 2019, 1-4 months, China exported textile yarn, fabrics and products 36 billion 671 million 800 thousand US dollars, up 0.8% over the same period last year; in 2018 of 2018, China exported 36 billion 377 million 900 thousand dollars of textile yarn, fabrics and products.

In April 2019, China exported garments and accessories 9 billion 671 million 100 thousand US dollars, down 11.8% compared to the same period last year. In 2019 1-4, our export garments and accessories were 39 billion 92 million 100 thousand US dollars, down 7.6% from the same period last year.

According to monthly data, China's textile and apparel exports in April were 19 billion 460 million US dollars, down 9.43% from the same period last year, the lowest monthly export volume since April in 2012.

Among them, textile exports amounted to 9 billion 789 million US dollars, down 6.90% compared with the same period last year, and clothing exports were 9 billion 671 million US dollars, down 11.85% compared with the same period last year.

It is worth noting that the second months since the appearance of clothing exports is less than that of textiles, which is the real reason for the weakness of China's textile exports.

In the following picture: the downward trend of the global economy is the core cause of the weakness of China's textile exports.

2. Is it affecting China's cotton imports?

No

From the chart below, we can see that in the past few months, Sino US trade negotiations continued, and China's imports of foreign cotton did not decrease because of the reduction in imports of American cotton. On the contrary, from September 2018 to March 2019, China imported 1 million 260 thousand tons of cotton, an increase of 85% over the same period last year.

3, what does it affect domestic cotton prices?

As far as Sino US trade friction is concerned, 200 billion of the US tax increases do not involve cotton spinning, but the remaining about 300000000000 of China's exports to the United States do not include tax and textile items. However, these commodities will bring pressure on the US economy itself because of their involvement in the national economy and livelihood of the United States. Therefore, the United States really needs to continue to wait for further information. In the light of the above mentioned, Sino US trade friction does not directly suppress China's cotton price in the short term from the end demand, but from the price pmission, and the pmission of the price from the price, as well as the reduction of the risk preference, and the medium-term pressure from the consumer side.

(1) short term pmission: Sino US trade friction directly lowered the price of American cotton and international cotton prices. In the past time, due to the expected market wide agreement between China and the United States, it was also one of the important reasons for the US cotton futures to rise over the past period. After the trade friction started again, the US cotton futures price squeezed "bubble" and superimposed Sino US trade friction, which directly inhibited the export of US cotton to China. With the decline of cotton prices, it would bring direct pressure to domestic cotton futures.

(2) medium-term pmission: if the United States increases its about 300000000000 commodity tariff from China to 25% in the future, it is expected to bring 1 percentage points of impact to China's GDP and bring about 0.5 percentage points of impact to the world and the United States. The pressure of global economy will directly bring direct pressure on the consumption and export of textiles and clothing, including China.

(3) if the Sino US trade frictions continue to escalate and the US cotton can not import and superimpose China's cotton price pressure, then 800 thousand tons of non state-run sliding tariff quotas will be put into effect in the early part of China. This will, to a certain extent, alleviate the loose supply of cotton in the future and benefit Zheng cotton.

What are the essential factors leading to the downward trend of Zheng cotton?

1, then, does Sino US trade friction lead to the core reason for the downward trend of domestic and foreign cotton futures prices?

It is a trigger factor, and at the same time, superposition of risk preference has a negative impact on cotton price, but it is not the core reason. The core reason is the weak demand of China's cotton textile terminal in the world's largest cotton demand country and the weak demand of the global cotton textile terminal resulting from the weakness of the global economy, which directly led to the bankruptcy of the so-called "gap theory" in China this year.

Mei cotton, as mentioned above, is "squeezing foam", while Zheng cotton's sharp fall in Sino US trade friction is a trigger factor, and it is a very important trigger factor. However, even if there is no Sino US trade friction, there is no bull market or a drop in the cotton trade. The reason is that China is the most important part of the global cotton terminal demand. However, this link has problems and consumption is not smooth. Besides the weakness of the upper export market, a key point that affects domestic textile sales is that the real estate will squeeze too much on the end demand of textile and clothing, and it will continue to exist.

According to the figure below, the consumption of clothing for urban residents is significantly more than that of commercial housing sales. The real estate has no doubt about the terminal consumption of textile products. In addition to clothing, the whole terminal retailing is affected by it. The poor consumption of terminal textile and clothing brings outstanding performance to the current industrial chain of cotton spinning market. Cotton sales difficulties, prices begin to loosen, cotton yarn prices are still falling, many mills are at the edge of losses, or even losses, and the finished product inventory is starting to increase, so is the grey cloth. This is the core reason for the downward trend of cotton prices.

2, the above is the essential factor of suppressing the end consumption of Chinese spinning clothes and the cotton price this year.

The April data released at the macro level, such as our earlier expectations, are "worse than March." in these data, more attention is paid to core data closely related to cotton spinning.

In April, loans and social integration were not as good as expected. The year-on-year growth rate of social credit balance dropped from 10.69% last month to 10.4%. When local debt issuance was relatively fast, the general demand for loans was weaker than expected and the main reason for the same period last year. That is to say, the short financing demand continued to weaken, and the PMI data and all kinds of high frequency data also began to weaken. In April, the relaxation of the supply side led to a rapid rebound in production capacity, which would lead to a subsequent re entry to the inventory cycle. This would make the terminal demand more weak, which would make the current textile and apparel industry chain drag longer than the stock market. At least 2 months, it would be in a passive inventory cycle, which would inhibit the formation of the upstream cotton prices.

Because the terminal demand is weak, the spinning and weaving industry itself is in a passive inventory cycle. Therefore, the additional macro level stimulation has a significant impact on both risk preference and stimulation to some extent. In the future, we should pay close attention to the potential fiscal stimulus and a certain degree of monetary easing policy.

3, let's look at the middle and rear links of the micro industrial chain: spinning and weaving factories.

In the near future, the price of the mill and fabric fell all the way down, and the stock of finished products were all accumulated. Most of the textile mills or grey fabric factories were on the edge of the loss and even lost their losses.

The following few excerpts of recent research results to more accurately show the current weakness of the cotton textile industry chain:

(1) the yarn of Anhui Suzhou * * cotton mill is still on the way, and the carding of 40 pieces of 23200 yuan / ton is carried out. The order can be spun to the middle of next month. Cotton is still in reserve for more than a month. Now cotton is not prepared for any more. It is mainly in the off-season. At present, the price of the national reserve is still a little high. What he is using now is the 17 year pickup of the spot price. Last week, the 312814800 spot price of the futures price reached home, which was almost one thousand less than that of the new flower, but the base of the last week's point increased by 50.

(2) Shijiazhuang * * cotton mill, with 40 matching yarn and 24500 yuan per ton.

It has already dropped by 500 yuan / ton before the holiday, but it still can not move. Now it is not a price problem at all. It is the demand is not enough.

There are several cotton mills here, and may day has not been booed until now.

Futures have fallen so much that the price on the spot is still very high, but there is not much cotton in hand. But this situation can be sustained, so we can see if the stock can be brought down.

(3) Xiajin * * cotton mill, Pu comb 32 offer 22900 yuan / ton with the tickets, there is no order now, there is no asking price.

At present, there are less than 500 tons of goods in their factory. They call the customers or traders of cloth factories.

Cotton is still India cotton 15400 before the festival, Brazil cotton 15500 yuan / ton net weight, and so on after the use of cheap cotton and then consider reducing prices.

Guo has looked at it for a few days, and the final price is not low. In the two days, I will see if the price increase will be less.

(4) Jinzhou * * cotton mill, Pu comb 32 offer 22700 yuan / ton with the ticket factory.

Cotton futures fell to the same level, and those two days would have to drop another two hundred or three hundred, otherwise they would not be able to move.

Cotton is still 3127 of Xinjiang cotton, which took 15400 of the weight to the home, recently asked, traders do not quote.

Yesterday, I got a cabinet of India cotton S-61-5/32 15200 yuan / ton net weight, better than Xinjiang cotton.

(5) the yarn of Pingdingshan * * cotton mill has been late lately, and it has slowed down since late April. The downstream customers are now losing a lot of goods, and the cotton prices are down and the market is weak. The price of cotton yarn is also down, and the price of cotton yarn has dropped by six hundred or seven hundred. The spinning speed is 40 fastest. The current price is the fastest. At present, the price is 27800-27900 yuan / ton, and the yarn is in stock. Cotton is still used in Brazil, Australia, and reserves are about twenty days.

(6) the yarn of Suizhou * * cotton mill has been relatively low recently, the price has dropped by five hundred or six hundred compared with last month, and the futures have fallen more slowly. The high 40 yuan 24000 yuan / ton has brought up the tickets. Today, the cotton has a little price, and the four batches are being sold. At present, two batches of the products are sold, 190913825 of which are traded, the 1909+700 basis difference, and the other two batches of 190513450. Now the cotton has come down for a month's storage, and the ones that should be taken must be carried out. Cotton yarn is one of the main downstream ones.

(7) Hebei Xingtai * * cotton mill, combing ring spinning 40, the current offer is still 27000 yuan / ton, do not move, there is also ten tons of eight tons of goods, the stock has been almost a month, went to the factory to see, cloth inventory is also full.

Cotton picked from Yucheng's southern Xinjiang, 16300 of the last month, the 16200 days of the two days of the public package.

There is not much money for them to make a picture of the national reserve. The market has not yet put forward the national cotton store. If it is sold, it will take some points, and the price should be lower than the spot price.

(8) Henan Xinye * * textile, cotton yarn or not, no list, stock began to increase, a little from the surrounding small list, can not play a big role, the price has dropped, the combs are tightly 40s, the small factories around are pulling 25500 yuan / ton with tickets, if there is a large list, the price can be discussed at 25000 yuan / ton.

(9) Guangzhou * * cotton mill, combed 40 yarn quotation 28000, half combing 26300 yuan / ton, Guangdong province sent to the price, now the goods are still available, after the Ching Ming Festival, only half of the machine was opened, so there is not much inventory, cotton is all used in Xinjiang cotton, from Shihezi back to 28 28 29 pairs of 29 hand picked 16100 machine pick 16000 gross weight with tickets.

(10) Weifang * * cloth factory, no order, no asking price, now regular cloth inventory has been twenty or thirty days, and now has quickly dried up.

In the past year, how many old customers could still make orders to turn over the list, but not until the end of June and early July.

Asked other cloth factory, stock is also a lot, but this time can not reduce production and holiday, the matter is out of name, put the workers will not come back.

4, from the cotton plant, the spot price of cotton in recent years has dropped, but the price of cotton in the southern Xinjiang is still strong, but the price of the cotton is still strong, but the price of the cotton is also falling. The price of the cotton outside the port is much lower than that of the futures. Therefore, traders and some cotton mills have been dropping the volume of the cotton contract in September with the decline of the cotton price. Recently, with the fall in the futures prices, the traders generally began to raise the base price, and even the cover market no longer started the spot price, which reflected the recognition of the market after the futures price went down, and at the same time, the futures price was even lower than the reserve cotton price.

5, from the perspective of global supply and demand in the medium term: supply and demand will not be tight next year.

In May 10th, the US Department of Agriculture released the global cotton production and demand forecast in May, especially the next cotton year 2019/2020 global production and demand forecast.

In the new cotton year (2019/20), if there is no bad weather damage in the main cotton producing areas in the coming months, global supply and demand will not be tight. Domestic and foreign cotton futures prices can hardly be hyped up by commodity attributes with tight supply and demand.

In addition, the increase in US output and final inventory will effectively suppress the US cotton futures price and further suppress the Zheng cotton contract.

In the new cotton year (2019/20), if there is no bad weather damage in China's cotton producing areas in the coming months, there will be no significant gap in China. The gap between production and demand will be fully covered by increased imports and final stocks. The "gap theory" of cotton that was previously underestimated in China's new year is not sufficient.

All in all: at present, the price of zhengmian futures has gone down. Some people are analyzing whether they can defend the 14000 yuan / ton mark. In the current low level, there is a great risk to catch up with the air. Once the trade friction has eased, the market fluctuation will have a positive reaction to the futures price. But the real bad factor for cotton price is the supply of the domestic industry level and the weak demand. These two points will bring pressure to the price of the cotton futures. Even if the trade frictions are to be relaxed in the future, then Zheng cotton will not see a high inflation.