Global Perspective: Pay Attention To The Decline Of The Market, And The Outlook Of Cotton Price Is Not Optimistic

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The decline in overseas consumption is hard to stop, and the international cotton price is weakening. The US employment data remains strong, deepening the expectation that the Federal Reserve will raise interest rates for a longer period of time. In December 2022, UK manufacturing activity declined significantly, one of the largest declines since the 2008-09 recession.

In terms of cotton market, the supply pressure of cotton in some countries in the northern hemisphere has shifted backward, but it has accelerated recently. In December 2022, Pakistan's listing volume increased by 84.9% year on year, and the cumulative listing volume still decreased by 37% year on year. As of the beginning of January 2023, the cumulative market volume of Indian new cotton is about 1423200 tons, which is about 1122600 tons less than the three annual average value. The Indian Cotton Association estimates that the total cotton output in 2022 will be 5.848 million tons, an increase of 12.0% year on year. In the textile market, the weak global demand has kept Southeast Asian textile exports cold. Indian research institutions said that high input, weak demand and low production and energy utilization have forced some enterprises to stop working. If this phenomenon continues, it is expected that the profit margin of textile mills in India may be further squeezed before the end of this fiscal year. In the short term, under the pressure of the continuous slowdown of the global economy, the decline of overseas consumption is hard to stop, and it is expected that the international cotton price will still weaken.

Before the Spring Festival, the pressure of consumption recovery is great, and domestic cotton prices are still facing challenges. According to the National Bureau of Statistics, the PMI of China's manufacturing industry in December 2022 was 47.0%, down 1.0 percentage points from the previous month, falling for three consecutive months, reaching the lowest level since February 2020.

On January 4, 2023, at the work meeting of the Central Bank, it was proposed to implement a sound monetary policy accurately and effectively, and will increase financial support for domestic demand and supply system. In terms of cotton market, Xinjiang cotton processing further accelerated, but sales slowed again.

According to the data of the national cotton market monitoring system, as of January 5, the processing progress of Xinjiang cotton was 77.8%, down 15.9 percentage points year on year; Sales progress was 18.8%, down 1.8 percentage points year on year. In the textile market, enterprises gradually entered the state of Spring Festival holiday, and the starting enterprises continued to close down. The sales rhythm slowed down significantly. However, with the stock of downstream grey fabric enterprises in the early stage, the inventory of finished products of textile enterprises generally declined to a certain extent.

In the short term, the market's expectation of consumption after the year is still rising. Enterprises' quotations for yarn are generally firm. There is still uncertainty about whether the demand for cotton can recover as scheduled after the festival. Cotton prices remain strong and still face challenges.