Zheng Cotton Meets The Limit Again, Does The Cotton Under The Epidemic Situation Touch Bottom?

Recently, the new crown pneumonia epidemic continues to spread throughout the world. The number of confirmed cases in South Korea, Japan, Iran and Italy is increasing. The WHO has also issued a warning to remind all countries of the world to make preventive preparations. With the spread of the epidemic, the market is concerned that global cotton consumption will decline further in 2020.

At the same time, influenced by the global financial market, stock market and commodity futures crash in recent days (the US Dow Jones index has slumped 1000 points), the ICE main contract has dropped to 60 cents / pound, and domestic spot price pressure is enormous. So on Friday, Zheng cotton futures were down again or expected. Now, has the price of Zheng cotton bottomed out?

Under the prevention and control of epidemic situation, textile enterprises resume work.

At present, according to the total caliber of passenger traffic, the reflux ratio is about 50%, the ratio of rework to the first tier and provincial capital is higher, but the low service industry in the city has a very low rework rate, and the main labor importation provinces do not show obvious migration.

According to the survey by relevant agencies, as of February 25th, the national comprehensive spinning rate was 35%, of which, the recovery rate in Jiangsu was relatively good, reaching 50%. Secondly, Fujian and Shandong were 43% and 36% respectively. Hebei, Henan, Zhejiang and other areas were more serious near the epidemic area or epidemic situation, and the starting rate was lower than the national average.

The recovery rate of spinning enterprises has gradually increased. According to the survey, the national recovery rate has exceeded 70%, and some provinces and municipalities have reached 90%. However, due to the lack of staff entry rate and the reduction of new orders, the overall start up process is still slow, especially for small and medium textile enterprises.

In short, the overall resumption of cotton mills and garment enterprises in February was not ideal. Although the recovery rate of the large and medium-sized manufacturers was higher, the capacity recovery still needed time, especially in the small and medium size mills, weaving factories and garment factories.

Logistics and warehousing status of cotton industry chain

At present, due to the disruption of Xinjiang's motor transport, cotton consumption has been greatly affected, and the turnover has been light, and the recovery time of Xinjiang's motor freight is from early March to mid March. Most of the exported cotton are transported by railway, so the transportation cycle is relatively long.

According to Cotton Union's investigation of domestic cotton storage enterprises, according to the current situation, most of the warehouses have been resumed, but the traffic control situation still exists, and the pick-up business can basically operate. However, each warehouse has different requirements due to different local policies. Users must contact the warehouse at least one day before delivery according to D/O requirements. If there are any problems, they can inform the logistics.

The redevelopment repository in the territory is generally left behind by staff on duty. Although part of the business can be carried out, the present situation is still road traffic control. In addition to the storage of some special lines, the railway can be arranged for transportation. (if there is need to communicate with the warehouse ahead of time, the delivery time can not be guaranteed), the lorries can not arrive at the warehouse, and many employees are isolated from work in the District, so the warehouse is fully recovered. Working hours are not good either. The details need to wait for the government's notice.

Affected by the epidemic, a large number of goods can not be shipped in time. After the communication with the warehouse, there is no warehouse reduction or concession. Later, the development of the epidemic will be further communicated.

Downstream orders for textile enterprises

Before and after the Spring Festival, this is the off-season of the textile industry, but affected by the new crown epidemic situation, the textile industry "off-season is even lighter."

At present, the small and medium sized spinning enterprises basically rely on the orders placed before the festival to arrange production and marketing. The main body of the production contract in mid February came from the end of last year. Some enterprises are not sure about the subsequent orders, and most of the downstream businesses are still waiting to see.

With the aggravation of the epidemic situation of important textile and garment importing countries (USA, EU, Japan, etc.) and the worldwide economic downturn, domestic enterprises' concerns about export orders have increased again. At the same time, the international market may set up defensive measures for China's textile exports. These factors will lead to a sharp weakening of short-term demand.

In March and April, the cotton textile industry in the first half of the order "small warm yang" period, but the impact of the epidemic caused subsequent order variables increased, so the control of domestic and foreign epidemic situation will become the decisive factor of spinning enterprise orders.

Storage cotton wheel in touch fusing value

According to the circular issued by the Ministry of Finance and the Ministry of finance of the People's Republic of China (2019 No. third) issued by the State Grain and Material Reserve Bureau in November 14, 2019, it is stipulated in the circular that when the domestic cotton price is higher than the international cotton price (1% tariff) 800 yuan / ton for 3 consecutive working days, it will suspend trading in the fourth working days. When the 800 yuan / ton is less than, it will restart the round in transaction on the first working day.

In February 26th, the difference between domestic and foreign cotton prices widened to 807 yuan / ton, which was the first time that cotton price difference between domestic and foreign cotton exceeded 800 yuan / ton. Cotton price difference between 27 days and outside is 891 yuan / ton, close to 900 yuan / ton boundary, price spreads into an expansion. On the 28 day, in the early morning, the increase in the volume of listing was increased to 15 thousand tons, increasing by 8000 tons overnight. The stability of the market and the turnover rate reached 100%. And 28 days cotton continued to decline, Cotlook A index fell 2.9 cents / pound, cotton price difference between inside and outside 1135 yuan / ton, so next Monday will suspend the auction.

The design of the reserve cotton rotation mechanism is a comprehensive consideration of the interests of all links in the cotton textile industry chain and plays an important role in stabilizing the cotton market price. Without the bottom of the policy, the price of cotton will increase. Therefore, the storage and storage enterprises should rationally judge the future market, make full use of the good rotation policy and reasonably control the risk of operation.

Cotton spot trading and cotton price trend forecast

The trading data of the cotton platform show that although the price of futures has fallen, it has stimulated some of the spot price resources, but it is still much lower than the same period last year. Xinjiang cotton in the mainland is also offering more quotations, with less enquiry and less market price. At the same time, affected by logistics and warehousing resumption, the cotton purchasing cycle is obviously elongated.

At present, the price of Zheng cotton has dropped sharply, and it is close to 12130 yuan / ton (28 yuan closing price 12180 yuan / ton) after the Spring Festival. But in fact, the impact of the epidemic on the domestic cotton textile market is sustained and gradual transmission, from the demand side to the supply side, from small and medium-sized enterprises to large enterprises, it may take 3-6 months. At the same time, domestic and external troubles coexist, domestic demand is downstream no order (retail business), upstream has no capacity (employees can not return), foreign trade is foreign orders, but domestic capacity is not urgent, or foreign production capacity has been, but domestic orders stopped.

With the spread of the epidemic across the globe, Global trade will slow down and the global economy will enter a recession. Therefore, in the near future, we need to focus on the control of epidemic situation at home and abroad, the situation of enterprises resuming work and the global trade and monetary policy under the epidemic situation. Cotton prices will remain low in the short term.