Second Quarter Return To The Supply And Demand Level, Cotton Prices Remain Weak Trend

In the first quarter of 2021, the domestic and foreign cotton markets fluctuated greatly. In January, cotton prices fluctuated in the range. In February, cotton prices rose sharply, and in March, cotton prices fell sharply. In January and February of the first quarter, macro water was released, and the overall commodity prices were higher, and then macro tightening, commodity prices began to appear a correction.

Based on the analysis of cotton fundamentals, the sharp rise in the early stage price has already digested the favorable expectations of the market. In February, the cotton price surged to more than 1700 yuan. Downstream enterprises did not recognize the high price raw materials, and the purchase volume began to decline, and the cotton price fell.

? ? Analysis of the cotton wave from rise to fall, in addition to the macro level of harvest and release of water, cotton supply and demand level changes little, but with the absolute price of cotton rising, high cotton price has restrained certain consumption, and the cotton price rise in the early stage has digested all the good expectations. In the short term, the market expectation and mentality have changed greatly, and there is no more profit spending after that Prop up, the price appeared to fall sharply.

Domestic market: supply is still sufficient and demand is improving

In the first quarter, domestic cotton new flowers are still on the market, and the overall supply is sufficient. The commercial stock of cotton is large, and the imported cotton is also large. Because the reserved cotton has not reached the condition of rotation, the overall supply is very sufficient. The second quarter and the third quarter are cotton de stocking cycle, and cotton commercial inventory will gradually decline. The consumption situation remained good in the first quarter, and the terminal consumption data was fair, especially the export data was good, the yarn inventory was low, and the sales situation of gauze was very good. Recently, the price of raw materials fell, and the purchasing began to wait and see, and the sales price dropped. In the second quarter, terminal consumption is expected to maintain or even improve, gauze inventory is expected to remain at a low level, and consumption will not be too bad. However, considering the recent price decline of raw materials and the traditional off-season in the second quarter, the consumption situation is not expected to be too good.

1. The commercial stock of cotton is high, and the quantity of cotton exported from Xinjiang is large

Commercial inventory: at present, although the commercial inventory is still high, according to the data of China cotton information network, as of the end of February, the national cotton commercial inventory was 5.0472 million tons, decreased by 206400 tons compared with last month, and increased by 74600 tons year on year. Among them, the inventory of cotton in Xinjiang warehouse is 3.8382 million tons, that in mainland is 739000 tons, and that in bonded area is 470000 tons.

According to the statistics of cotton logistics branch of China Cotton Association, the total cotton shipment in February was 355600 tons, about 50000 tons less than that in January, a decrease of 12.3%. From the point of view of transportation mode, the highway transportation volume decreased significantly, and the railway transportation volume was higher than the same period in recent three years. Transport prices, most of the export cotton transport routes, road freight rates have slightly decreased, Urumqi Railway Group Co., Ltd. freight center to the mainland Bureau of lint box car freight rates down, the overall increase of 5%, 60 box cars from 20% to 15%, 70 box cars from 30% to 25%. As of February, the cumulative cotton export volume of Xinjiang in 2020 / 21 was 2.155 million tons, an increase of 22.1% year-on-year.

2. A large number of American cotton purchases, cotton imports increased

In terms of cotton import, according to the customs data, in the first two months of 2021, the cumulative import volume of cotton reached 690000 tons, an increase of 68% over the same period of last year, showing a blowout growth. Of course, American cotton is still the main force of absolute import. In the first two months of this year, the monthly import volume of American cotton is expected to be around 150000 tons. Secondly, Brazilian cotton is welcomed by the Chinese market because of its price advantage, strong export capacity and excellent quality index this year. Brazil cotton import will maintain a strong trend in December from January to February, with a cumulative quantity of about 250000 tons.

On the one hand, the large import volume of cotton is due to the large price difference between domestic and foreign cotton, which highlights the advantages of foreign cotton. On the other hand, the cotton import quota of the previous year before the end of February needs to be used up, so the cotton import volume in the first two months has increased significantly. According to the first phase of Sino US trade agreement, China imports a large amount of American cotton, and the market expects that a large amount of cotton will be imported into national warehouses. The cotton import volume in the first quarter is larger than that in the second quarter.

3. Reserve cotton is not rotated in, pay attention to rotation policy

Since the policy of rotation of reserve cotton indicates that the internal and external price difference will only be started within 800 yuan, but in fact, this price difference has not been met since December last year, so the National Reserve has not been able to rotate into cotton this year. In recent years, the rotation of reserve cotton started in May, but there is no official document issued so far this year, so we need to pay attention to relevant policies in the later stage.

4. Cotton industry inventory is high, gauze inventory is low

In January / February, the market was bullish, textile enterprises actively replenished their stocks, and the industrial inventory of enterprises reached a new high in the same period in recent years, while the inventory of gauze remained at a low level due to the de stocking in the second half of last year. According to the data of China cotton information network, as of the end of February, the cotton industrial inventory of textile enterprises was 882400 tons, 48100 tons less than last month. According to the data of China cotton information network, as of the end of February, textile enterprises had 8.97 days of yarn inventory, 24.15 days of the same period last year, 14.65 days of grey cloth inventory, and 29.21 days of the same period of last year. At present, gauze inventory is still at the low level in the same period of history. In terms of profits, the profits of domestic textile enterprises are very good recently. Even the profits of c32s per ton are 1000-2000 yuan / ton, which is one of the best profits in recent years.

5. Export data is good, domestic consumption is fair

In the first quarter, both export and domestic consumption of textiles and clothing were good. In the second quarter, it is expected that with the effective control of the epidemic situation, the global economy will gradually recover, consumption will be further improved, and the terminal consumption of textiles and clothing will not be too bad. However, considering the recent decline in the end price of raw materials and the second quarter is a traditional off-season, the consumption situation is not expected to be very good. Overall, it is expected that the export and domestic sales of textiles and clothing will maintain the status quo or optimistic state.

Export: from January to February 2021, China exported 22.134.1 billion US dollars of textile yarn, fabrics and products, with a year-on-year increase of 60.8%; from January to February 2021, China's export of clothing and accessories was $24.054.2 billion, with a year-on-year increase of 50.0%. From January to February 2021, China's textile and garment exports totaled 46.188 billion US dollars.

Domestic sales: due to the better control of the epidemic situation in China, the national economy is gradually recovering, and the consumption situation is also gradually recovering. According to the data of the National Bureau of statistics, from January to February, the total retail sales of consumer goods reached 6973.7 billion yuan, an increase of 33.8% over the same period of last year. Among them, the retail sales of clothing, shoes and hats, knitwear and textiles reached 226.2 billion yuan, an increase of 47.6% year-on-year. Domestic consumption data is fair. However, if we lengthen the time line and compare it with previous years, we can see that the domestic sales data of the first two months of this year are in general, even worse than those of previous years.

6. Prices rise first and then fall, cotton yarn and viscose yarn fall

In the first quarter, cotton staple fiber prices rose first and then fell. Due to better downstream demand and lower gauze inventory, the recent sales of gauze were better, and the yarn prices also followed the trend of higher prices, and then prices began to fall. According to the data, the price of polyester staple fiber increased by 33% from 6000 yuan / ton in early January to 8000 yuan / ton on February 26. After that, the price began to fall, falling to 6950 yuan / ton, down 13%; the price of viscose staple fiber rose from 11300 yuan / ton at the end of January to 15700 yuan / ton in the middle of March, with an increase of 39%. At present, the price is slightly reduced to 15300 yuan / ton.

The downstream yarn prices also showed a trend of first rising and then falling. The c32s price rose from 23400 yuan / ton in early January to 25950 yuan / ton in early March, with an increase of 11%. Recently, the price dropped to 24300 yuan / ton; the price of t32s rose from 10700 yuan / ton in early January to 13300 yuan / ton in early March, with an increase of 24%, and is now reduced to 12150 yuan / ton; The price of r30s rose from 15200 yuan / ton at the beginning of January to 19550 yuan / ton, an increase of 29%. So far, the price is basically maintained at this position. From the price trend of alternative staple fiber and downstream yarn, we can also see that the recent downstream sales situation has indeed declined.

However, the prices of viscose yarn and cotton yarn are very resilient. On the one hand, due to the low intermediate inventory, textile enterprises have a strong anti falling mentality. On the other hand, it can be seen that the downstream demand is still OK, and what enterprises need to do is still previous orders.

7. Warehouse receipt

In terms of warehouse receipts, as of March 23, Zhengzhou cotton had generated 17588 warehouse receipts, and the effective forecast quantity was 3966. According to the calculation of each warehouse receipt of 40 tons, the total warehouse receipts amount was equivalent to 862200 tons of cotton. This year's cotton warehouse receipt quality is poor, warehouse receipt premium is not much, some even need to discount, the enterprise's enthusiasm for making warehouse receipt is relatively low. According to the seasonal trend of previous years, warehouse receipts will continue to increase slowly before May, and the volume of warehouse receipts is expected to gradually decrease after May.

Abroad: at present, the contract signing and shipping progress of cotton in 2020 in the United States are good, and the intended planting area of cotton in the new year will increase. With the past epidemic situation, the global economic recovery will benefit cotton consumption in the new year. In addition, India's domestic cotton demand side significantly improved, cotton yarn demand is good, and in the premise of the lowest seed cotton purchase price as a support, cotton prices will not be too bad in a short time. In 2021, global cotton supply will be loose and demand will increase. However, the United States cotton rose significantly in the early stage, and there was a large range of callback after the profit factor came out.

Domestic: in the second quarter, cotton returned to the level of supply and demand. The industrial and commercial inventory of cotton was relatively high, and the amount of imported cotton was also large. There may be reserve cotton supply in the later period. The cotton supply level remained loose, but the weather in the new year will become the focus of speculation in the second quarter. In terms of demand, with the popularization of global vaccines, the global economic recovery is in sight and will bring about the growth of terminal consumption, which is better in the long run. In addition, the inventory of intermediate links in the textile and clothing industry chain is still low, which also gives the market relatively optimistic expectations. In terms of absolute price, cotton price has recently dropped to 14000-15000 yuan / ton, which is basically a medium price.

Combined with various influencing factors, it is expected that the cotton price market in the second quarter may maintain a weak trend at first, and then a strong trend will be likely to fluctuate after bottoming. The uncertain factor in the second quarter may be international relations.