Zheng Cotton Market Upward Driving Force Is Insufficient

At present, the domestic epidemic situation is basically over. "Stable employment and expanding domestic demand" has been repeatedly mentioned at the national level. Many enterprises export to domestic sales, and textile enterprises take an active part in it. However, the overall recovery of the industry needs to wait for the global epidemic to end. The latest USDA report shows that the end of cotton inventory will continue to rise, while domestic textile production decline, passive storage. The International Textile Federation's survey of global textile enterprises shows that the decline in orders will further expand. Based on this reasoning, cotton as raw material has no effective driving force, and Zheng cotton will maintain low oscillation.

USDA expects global inventory rise in 2020/2021

The latest US Department of agriculture report shows that in 2020/2021, the end of global cotton stocks are expected to rise for second consecutive years, but the growth rate is significantly reduced. Due to the decline in global cotton harvest area, global production is expected to be reduced by 3 million 700 thousand bales. With the global economic recovery, cotton consumption is expected to increase by 11 million 500 thousand bales. The end of the world inventory is expected to increase by 2 million 300 thousand packages, but the inventory consumption ratio dropped from 93% to 85%. In 2019/2020, global consumption is expected to drop to 105 million bales, a decrease of 5 million 600 thousand packages, a decrease of 12.7% over the same period last year, a 1 million increase in global output and an increase of 5 million 900 thousand packages in the end of the year, an increase of 16 million 900 thousand packages compared with the same period last year.

In 2020/2021, the US cotton area is expected to be 13 million 700 thousand acres, which is basically flat, but the harvest area is expected to decrease by 2%. The reason is that the yield has increased year by year, while the US cotton yield is expected to increase slightly, so the output of US cotton is estimated to be 19 million 500 thousand packs, which is 400 thousand less than that of the same period. US consumption and exports are expected to recover as the global economy recovers. Domestic consumption is expected to increase by 200 thousand bales and export volume by 1 million packs, but ending inventory is expected to increase from 600 thousand to 7 million 700 thousand packages, and the inventory consumption ratio will rise to 41%, slightly higher than 2019/2020, the highest level since 2007/ 2008 (55%).

Textile production decreased and inventories increased.

The picture shows yarn stock situation.

China's cotton warning system has seen more than 90 textile enterprises in the country, and textile production has declined, raw material inventories have dropped, yarn inventories and cloth inventories have increased. As of April, downstream textile orders continued to slump, the end of the month production and holiday business increased, textile production decreased compared with last month. According to the survey, yarn production decreased by 2.8%, down 7.7% compared with the same period last year. Among them, the percentage of pure cotton yarn was 67%, down 0.4 percentage points from last month, and the proportion of blended yarn and chemical fiber yarn was 33%, up 0.4 percentage points from last month. Cloth production decreased by 3.4%, down 6.9% compared to the same period last year. Among them, the proportion of pure cotton cloth fell by 0.5 percentage points last month. Yarn sales rate was 60%, down 2 percentage points from last month. At present, the finished product inventory of spinning enterprises is 28.45 days, an increase of 3.68 days from last month. Finished product inventory for grey goods finished for 34.87 days, an increase of 4.12 days from last month.

Decline in orders for textile downstream

From March 28th to April 3rd, the International Textile Federation (ITMF) surveyed the second report of the new crown pneumonia epidemic. The average textile orders in the world decreased by 31%. In 2020, the global textile business turnover was 28% lower than expected. From 16 to 28 April, ITMF completed the third survey of the global epidemic. The results showed that the average order of textile and weaving enterprises in the world decreased by 41%. Among them, the East Asian region dropped by 28%, the decrease was significantly smaller than the rest of the world (falling by more than 40%), because East Asia was the first to get out of the epidemic, especially China and South Korea successfully controlling the development of the epidemic.

According to the latest research report, from a global perspective, the operating income of textile enterprises in 2020 is expected to decline by 33% compared with the same period last year, and the turnover of European companies is expected to decline by 22%, which is obviously better than the 33% of last survey. East Asia is expected to drop by 26%, close to 24% of the previous survey. The situation in Southeast Asia and South Asia is obviously deteriorating, which is expected to decrease by 38% and 31% respectively over the same period last year, which is obviously higher than the 23% and 15% last time. The reason is that countries in these areas are relatively late affected by the epidemic, and the impact of the epidemic is lagging behind.

To sum up, the most difficult time in the global textile market is yet to come, but the Asia Pacific market will take the lead in revival due to better epidemic control. On the whole, the downstream orders will shrink sharply, which will greatly increase the price of raw materials and treat Zheng cotton in a short way. From a technical point of view, at present, Zheng cotton is located near the middle track of the oscillating finishing area. Combined with weaker fundamental analysis, Zheng cotton will still maintain weak oscillations.