Market Analysis: The Fundamental Edge Of The Cotton Textile Industry Chain Turns Better

?

Since November, the operation of cotton market has been characterized by "strong expectation and weak reality". In December, the cotton downstream market showed signs of improvement to varying degrees.

At present, the fundamental edge of the cotton textile industry chain has improved, the spot turnover of cotton has increased, the price of cotton yarn has rebounded, the textile mills have made a small replenishment before the Spring Festival, the inventory of finished products of textile mills and weaving mills has declined, and the operating rate of weaving mills has increased.

In fact, since the beginning of this month, the textile downstream has begun to show a marginal improvement.

As the terminal textile clothing market is about to enter the Spring Festival consumption peak season, coupled with the winter clothing demand increase brought about by the cold wave, textile clothing consumption has warmed up, thus driving the downstream to open seasonal replenishment, and providing some support for cotton prices in the short term.

At present, the improvement of some downstream orders is mainly reflected in the fabric orders of the weaving factory, so the weaving factory has recovered confidence and started seasonal replenishment of raw materials.

However, considering the current high cotton yarn inventory, the replenishment of the weaving mill is still mainly to digest the existing cotton yarn inventory on the market, and the transmission strength to the spinning end is still limited. The spinning enterprises continue to decline due to the impact of spinning profit contraction. At present, the cotton yarn inventory on the market may meet the replenishment demand of the weaving mill.

Although there are few orders, they are still needed. Replenishment before the Spring Festival is a routine operation.

At present, the raw material inventory of the textile mill is less than 30 days, still at a low level. The raw material inventory of the weaving factory is less than 8 days, the second lowest level in nearly 5 years.

This round of replenishment is expected to significantly digest the high cotton yarn inventory in the hands of traders, improve the industrial sentiment, and lay the foundation for the subsequent industrial chain to resume normal operation.

However, the current cotton consumption is constrained by the high cotton yarn inventory, which is weak. It is difficult for textile mills to increase the load of raw materials for substantial replenishment before the traders' cotton yarn inventory is depleted, and there is still pressure above the cotton price.

The upstream ginning plant is in a loss state of high cost and low selling price. The panel price rebounds or attracts a large number of hedging orders. The pressure above the cotton price is prominent. After the signs of warming in the lower reaches appeared, the strong expectation also gave some support to the lower cotton price. The current upward and downward drive of cotton market is not strong, and it is expected that it will be difficult to shake off the oscillation pattern in the short term.

In the short term, as the end of the year approaches, there is still a need to replenish the stock due to the superposition of just needed goods and holiday demand. The downstream is also expected to see a phased recovery and order improvement. The start of construction will gradually recover to the average level, and the bottom support of prices will still exist. The dynamics of domestic and external demand may determine the direction and space of future cotton prices. Domestic demand in the fourth quarter still has room for recovery in the Spring Festival consumption peak season, and just in need of goods will have a certain role in boosting the market.

It is learned that the industry faced the dilemma of almost no bill at the early stage, and the cotton price continued to fall. With the recovery of the downstream and the rise of cotton prices, the sustainability of the demand recovery in the later period is critical to the trend of cotton.

At present, the core factor of domestic cotton market still lies in the repair of textile links. "If the operating rate of textile mills can stabilize and recover, it will strongly support the cotton price, but if the rising trend of cotton yarn price cannot continue and the operating rate continues to decline, the cotton price will also experience the test of negative feedback.

However, the sustainability of cotton downstream warming still needs to be observed. The accumulated cotton yarn inventory in the early stage is far higher than the average level, and the operating rate of textile mills is still declining. It is difficult to recover fundamentals overnight.

The warming of the cotton yarn market needs the support of orders in the weaving industry. In the later stage, we need to pay attention to whether the overall consumption can recover. Including macro aspects, whether there are policies to further boost consumption, etc.

This round of downstream warming is still dominated by rigid demand replenishment, and we still need to pay attention to whether the cotton yarn inventory can be digested as scheduled in the first quarter of next year. In addition, before the overseas interest rate cut cycle, the recession expectation will still bring pressure on textile consumption, and the downstream warming process will still have some twists and turns.