Cotton Consumption Is Substantially Lower Than Expected.

According to the joint investigation of China Cotton Textile Industry Association and China Textile Industry Federation, as of the end of March, orders for some textile cluster direct export products were down by 50%-70%, and indirect export yarn orders were reduced by about 30%-50%. Cotton textile and garment enterprises in Guangdong, Jiangsu and Zhejiang, Shandong and other places have reflected that since the middle of March, the export orders have been cancelled, slowed down or even defaulted more and more seriously. Not only in Europe and America, Japan and Korea, and other serious epidemic countries and regions, even the orders in South America, Middle East and Southeast Asia showed a certain shrinkage.

Several Cotton Traders in Henan, Shandong and other places said that due to the new outbreak of the global crown, the economy, trade, transportation and exchanges were strongly impacted. In addition, the domestic cotton and cotton textile industry chain problem is becoming more and more prominent. The domestic cotton consumption in 2019/20 will fall far beyond the expectations of the industry.

USDA's latest global production and storage forecast report shows that the total cotton consumption in China in 2019/20 is 7 million 947 thousand tons, down 218 thousand tons compared with the February report. The latest report of the national cotton market monitoring system shows that domestic cotton consumption forecast for 2019/20 is 7 million 143 thousand and 600 tons (down 295 thousand and 300 tons compared with February). Obviously, in the first half of 2020, when the new crown epidemic was rampant and all countries took a closed door policy, China's cotton consumption demand inevitably suffered a greater impact.

The author thinks that the following three factors determine the actual consumption of cotton in 2019/20: first, whether the new crown pneumonia epidemic in Europe and the United States can be effectively controlled and inflection point before the end of June. As long as China's main textile export countries and export markets win the battle, China's cotton consumption will really hit bottom. If the outbreak continues to August, the annual cotton consumption is likely to decline by 1 million 500 thousand tons or more than 1 million 800 thousand tons in 2018/19.

The two is the end of the oil war between OPEC and Russia. Since April 1st, the original OPEC+ reduction agreement has been formally invalidated. Saudi Arabia's largest oil production capacity has increased to 12 million barrels per day, and oil companies are required to raise oil production to 13 million barrels per day. It is unlikely that the OPEC will compete with Russia in a new round of competition, and it will not be enough to force one of them back to the negotiating table. At the bottom of the oil price, cotton demand is hard to secure.

Three, how long does the domestic textile consumption market need to stabilize and recover under the new crown epidemic situation? From the survey point of view, the epidemic is very obvious not only for the direct export of textile products, but also for the indirect export. The impact on domestic demand can not be underestimated. Due to the outbreak of the new crown in 1 and February, most clothing enterprises and practitioners accounted for only 20%-30% of the inventory (sales of some small and medium-sized garment factories fell by more than 80% over the same period) in spring sales, and the situation in the 3-4 months did not show much improvement. Under the pressure of domestic and international epidemic, all trades and professions are facing the risk of layoffs, cut down or even shut down. Some enterprises have taken measures to stop production and lay off workers. With the decrease of income and the difficulty of employment, domestic consumption capacity and willingness will continue to decline.