Market Observation: American Cotton Rose Continuously, And Global Cotton Textile Demand Improved Slightly

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Recently, American cotton has risen continuously, and the global demand for cotton textile has slightly improved, but it is still general in general. In the future, American cotton export demand is still the key to guide the price. The demand for replenishment before the Spring Festival in China exceeded the market expectation, and the demand turned around near the Spring Festival. The market has doubts about the sustainability of demand after the Spring Festival. Domestic and foreign cotton prices rose or staged market. In the short term, the trend of American cotton was stronger than that of Zheng cotton, and the demand side performance continued to be concerned.

Global consumption has picked up slightly recently

The supply and demand report of the US Department of Agriculture in January continued to reduce global cotton consumption, which has reached a low position in recent years. It is expected that the space for further reduction is limited. Recently, the start-up of major textile exporting countries has improved. The replenishment of stocks before the Spring Festival was better than the market expectation, and the cotton yarn inventory of textile enterprises fell sharply from a high level. Internationally, Vietnam, India and Pakistan have also improved their operating rates to varying degrees recently, but the overall performance is still average.

In 2023/24, American cotton output dropped to a multi-year low, providing support for prices. Recently, China's purchase of American cotton has increased. As of the week of January 11, 95300 tons of American upland cotton were signed weekly in 2023/24, an increase of 60%, 85% higher than the average level of the previous four weeks. Among them, 51600 tons were signed by China. In 2023/24, the total signed sales volume of American upland cotton and Pima cotton will be 2.1548 million tons, accounting for 82% of the annual forecast total export volume. Seen from the data, China's contracted volume has picked up again, and has reached a high point in recent years. The US cotton output in 2023/24 is low, and the subsequent available cotton may not be much.

From the fundamental point of view, we can't see the trend of American cotton for the time being, but we still need to be alert to the periodic strong market of American cotton.

Focus on downstream performance before the Spring Festival

Since December 2023, the demand for downstream cotton yarn has begun to improve, the cotton yarn inventory of textile enterprises has been continuously reduced, and the downstream demand has improved. Generally speaking, before the Spring Festival, there is often a small peak demand season, and the market also reflects that some external demand orders were issued some time ago. Weaving mills have a good demand for cotton yarn procurement, especially for high count yarns. After a period of continuous replenishment, the cotton yarn raw material inventory of the weaving mill has reached a high level. The demand for cotton yarn before the Spring Festival has indeed weakened, but it is generally OK. The biggest concern of the market for the future market is still the sustainability of demand. After all, it is the peak period of new cotton supply, and the cotton supply is sufficient. Recently, a large number of imported cotton has also arrived in Hong Kong. In general, the supply of cotton raw materials is not short.

The cotton yarn inventory of textile enterprises has been continuously reduced, and the inventory has reached a low position. As of December 2023, although the monthly cotton yarn inventory has fallen from a high level, the absolute value is still high. It is expected that the inventory will continue to decline in January. At present, the most knotty point in the market is the sustainability of demand. If the demand can continue after the Spring Festival, the downstream will have enough power to undertake the rising cotton prices, and the final demand situation still needs time to verify. Looking back last year, Zheng Mian also rose continuously in January 2023, which was mainly driven by the demand for replenishment before the Spring Festival and the optimism after the full liberalization of domestic epidemic prevention and control. However, the demand after the Spring Festival 2023 was less than expected, and the price corrected. The market was also cautious about the demand after the Spring Festival 2024.

Recently, domestic and foreign cotton prices have risen together. From the perspective of trend, American cotton has risen more strongly, mainly supported by export contract data and low output. Other major producing countries, Brazil and Australia, have high yields, which to some extent limits the height of American cotton. The global demand for cotton textiles is still moderate, and the trend of American cotton is not seen for the time being. Zheng Mian also needs the guidance of demand after rising. Whether the demand can continue to improve after the Spring Festival will be the key to the cotton trend.