Cotton Prices Rebounded, All Sectors Expect G20 Results.

Entering the June, the impact of Sino US trade war on textile industry has been increasing, especially for small cotton mills. As of June 20th, the domestic C32S average price closed at 21480 yuan / ton, down 1042 yuan / ton from last month. But, unlike before, this week, with the news of the 19 day Sino US leaders' call, Zheng cotton futures once approached the limit, and confidence in the downstream market was slightly restored. The average price of cotton yarn C32S has risen for the first time since the first quarter of this season, and the average price this week rose 58 yuan / ton from last month.

From the above picture, it can be seen from the beginning of June 18th that the stock of textile enterprises began to decline, on the one hand, because of the downgrade of the spinning enterprises, the small factories stop and the medium and large textile enterprises have reduced production. Before the opening rate was 30%, a large manufacturer in Guangdong was even less than 5% of usual. On the other hand, because of Zheng cotton's downfall, the downstream wait-and-see panic has eased, and textile companies are actively taking inventory. In terms of price, the quotation of pure cotton yarn has basically stabilized in recent years, but because of the high inventory of finished products of spinning enterprises, the difficulty of price rise is relatively high, and the ratio of production and marketing is very poor. The yarn on the market is basically still in the state of "having no price and no market".

Judging from the profit and loss of spinning, with the rise of cotton prices, the spot profit level of textile enterprises has been declining. In other words, at present, whether or not to use cotton stocks or not, textile enterprises must lose money. In fact, except for the low profit yarn with some profit from the use of reserve cotton as spinning material, almost all other pure cotton yarns are in a state of loss, and there are few spanactions in the market. It is worth mentioning that since the launch of the reserve cotton wheel, the average daily average price of the reserve Xinjiang cotton has decreased from 15207 yuan / ton to 12698 yuan / ton, or 16.5%, lower than that of Zhengzhou CF1909, but it is significantly higher than that of 2018/19 cotton spot. Some traders and cotton related enterprises said that the adjustment of reserve cotton's base price was only a standard and only a "wind direction". The actual auction intention, the increase rate and market sentiment were controlled by traders. The results of "high base price, low price increase" or "low base price and high price increase" were not different for buyers. Therefore, if the actual effect is taken, the reference price of bid auction is more significant and the direction is clearer.

The price range of foreign yarn continued to slow this week. As of June 20th, the spot price of FCY Index C32S was 21987 yuan / ton, down 68 yuan / ton compared with last week. Since May, domestic yarn has dropped more than imported yarn, and local manufacturers have lost their overall market price due to high inventory. The price difference between domestic CY Index C32S and imported yarn FCY Index C32S dropped to 387 yuan / ton from the end of 4 to -167 yuan / ton, and the loss of cost advantage is undoubtedly exacerbated by the current import yarn. In addition, 3 and April yarn imports remained at around 190 thousand tons. In the case of poor downstream demand, stocks were gradually tired. Traders are under pressure, and continue to sell. Despite the steady or slight decline in stocks last week, the stock is still around 104 thousand tons, a high level since 2017. In terms of RMB exchange rate, Dr Xiao of the Academy of Social Sciences believes that it is impossible for the renminbi to become independent of the US dollar and emerging market currencies. In addition, influenced by trade wars, the relationship between the won and the RMB exchange rate is becoming more and more closely related. China's monetary policy has also maintained a healthy balance. The interest rate gap between China and the US does not support the depreciation of the RMB exchange rate. The result of short-term exchange rate prediction is that China's economy is not bottoming out, the US dollar index is not peaked, and the fluctuation of RMB exchange rate will increase, but the possibility of breaking 7 is unlikely. In short, if China's economy goes down, the European economy will come up, and the US dollar index will decline correspondingly.

Futures, due to the high correlation between cotton yarn and Zhengzhou cotton, the price rebounded sharply along with cotton this week. 18, 19 and 20, the closing price of CY001's main contract is 21215, 21775, 21725 yuan / ton respectively. Turnover has also returned to about 65 thousand hands. According to Zheng Shang, 7 of market makers made cotton yarn futures traders, while non market makers accounted for 3. Since May 5th this year, Zheng merchants have been introducing market makers. Therefore, the volume of trading and holdings have increased sharply in recent years, and precipitation funds have been maintained at around 100 million yuan.

All in all, in the "darkest" era, the market is definitely developing in the near future. The Sino US trade friction is triggered by a long-term consultation process. In the short term, the United States is facing an election. Trump wants to ease the tension between the two countries and soothe the national sentiment. In the long run, what really touches the heartstrings of the textile industry is that the US side has not yet determined whether it will impose tariffs on China's $300 billion export to the US. In the process of waiting for the result, the downstream garment enterprises are reluctant to take orders or purchase raw materials at risk. However, whether the outcome of the trade war is good or bad, in fact, it is a good thing. Once the policy is settled, some early stage non execution orders will start negotiation. The buyers and sellers will also adjust their way of operation according to the result, and the market will improve at that time.