Cotton Yarn Market: Everything Is Falling Except Inventory. (5.20-5.24)

Entering this week, Sino US trade frictions continue to escalate, and the market interest of bilateral tariff increases continues to ferment. The yarn futures and spot prices showed a sharp decline this week. As of May 23rd, the domestic C32S average price was closed at 22392 yuan / ton, down 195 yuan / ton compared with last week, a sharp decrease of 585 yuan / ton compared with the same period last month. At present, enterprises are facing a dilemma: continuing production and increasing inventory pressure. Business is running in a dilemma. It is understood that the recent textile enterprises continue to intensify efforts to sell inventory, many textile enterprises basically sent all the sales staff to the first tier market, and the high price raw materials in the early stage is the main reason for the direct sales disruption.

According to many manufacturers, the main source of raw materials in recent years is the auction of cotton reserves and customs clearance of cotton. Since May 10th, the price of raw materials has dropped sharply, giving rise to mixed emotions. The joy is that the cost declines, leaving room for the price reduction of yarn. The worry is that the sharp decline in raw material costs is a double-edged sword, and it will also lead to substantial losses in early inventory. In fact, most of the textile enterprises have been cutting down the quoted price recently, but the orders received are still very small. At present, the stock of spinning enterprises has increased substantially.

In the near future, Zheng cotton continued to decline and the low point dropped to 13380 yuan / ton. This week, the reserve price of the cotton reserves was 13893 yuan / ton (standard class price), down 579 yuan / ton compared with the previous week. Xinjiang cotton spot reduction of nearly 1000 yuan / ton. Large fluctuations in raw materials, most of the textile enterprises do not dare to hoard cotton. According to the introduction, after the Spring Festival, most textile enterprises have kept their raw materials inventory low, and the raw material inventory of the large plant has been maintained for 20-30 days, and the small factory has only maintained 10-12 days. Although the enterprise is thirsty for cotton, it avoids the need for cotton. Entering this week, textile enterprises are mainly buying cotton and other cotton resources have been reduced. Judging from the profits of textile enterprises, because of the decline of cotton raw materials this week, if the cotton prices are 20 days ago, the profits will still be negative, but at the same time, if the cotton prices are calculated in the same day, the profits of textile enterprises will rise. If the future decline continues, the profits of textile enterprises can be expected. Of course, the premise is that the finished products can be sold out.

The downstream cotton and grey fabric market has experienced the "off-season ahead" after experiencing the "peak season". When the market is good, the weaving factories will produce more orders. When the market is not good, the weaving mill will reduce orders and strengthen the production of regular cloth. At present, it is in a state of decreasing orders and increasing routine cloth production. In the short term, even if the factory is able to afford the production of regular cloth, the factories that are well funded can increase the production of conventional cloth, which is likely to result in difficulties in operation due to the increase in inventory and then fall into a downtime or close down. As of May 23rd, the start-up rate of weaving mills was 4.3% lower than that of the same period last year, and inventory was 6.9 days higher than that of the same period last year. Under the influence of the global economic slowdown and the rise of trade protectionism, domestic textile factories generally reflect the reduction of export orders, which is far from the same period last year. Even though some textile factories have export orders, they are mostly short and small, and the delivery period is not urgent. In the case of shrinking export orders, the weaving mills have turned their attention to the domestic market. According to the current form, it is possible to sell the goods on a reduced price.

In terms of imported yarn, the deep and backward internal and external yarn with ICE and Zheng cotton fell. As of May 23rd, the spot price of FCY Index C32S was 22464 yuan / ton, and the price of domestic and foreign yarn had been reduced to less than 100 yuan. Under the external market, Chinese traders began to expand their orders partially, but the whole market was still low priced and on demand. On the other hand, since the central parity of RMB depreciated 270 points in May 7th compared with the previous day, it began to go straight to 7. According to the general understanding, the depreciation of RMB will enhance the international competitiveness of export products. On the basis of the same order price, enterprises can get higher profits through exchange rate difference. However, the reality is that devaluation is also full of overseas customers' orders, because they believe that the yuan will continue to depreciate, which will extend the next time and affect the volume of spanactions. Moreover, many customers want to renegotiate the price, and the bargaining time is greatly extended. Depreciation may bring short-term benefits to some enterprises, but in the long run, China's foreign trade enterprises can not get more benefits from it, let alone have a significant impact on imports. In some foreign media, the sharp depreciation of the renminbi is a counterattack to Sino US trade frictions. However, as early as at the previous Boao forum for Asia, Yi Gang, President of the Central Bank of China, said that China would not depreciate the renminbi to deal with trade disputes.

According to country, Vietnam has been relatively strong because of its high cost and high cost. But with the fall of ICE, the cost of spinning has declined, and the price of Vietnamese C32S has dropped from 2.86 US dollars to 2.72 US dollars per kilogram. In India, the deep upside down trade made the traders look awed. Even if the price dropped more than 10 cents, it was still in an upside down state. India's domestic cotton prices fell by far less than ICE. The rupee fluctuated sharply and the overall export situation was poor. In addition, Pakistan cotton yarn tariff free entry into China will also have a great impact on domestic yarn. The original tariff is 3.5%, and the price cut after tax is several hundred yuan, which is very competitive in the domestic market.

Futures, as the upstream cotton fell sharply adjustment, the downstream cotton yarn also failed to escape. Cotton yarn futures plunged this week. CY001's main contract closed at 24990 yuan / ton from last month, and fell to 21500 yuan / ton the day before yesterday, which fell directly from its lowest closing price since August 18, 2017, reaching an alarming 13.97%. Too much concussion also directly "detonated" the futures market. On the 21, 22 and 23 days, the main force traded 60960, 80806, 85654 hands respectively, and the total position was more than 20 thousand hands. In just 10 days, the precipitation fund of cotton yarn futures has also been doubled from almost negligible 1 million 500 thousand yuan. As of yesterday, the sedimentation fund of cotton yarn futures was 111 million yuan, although no winner was found in the trade war, but it was estimated that even the did not expect it to be the only winner.