Market Analysis: It Is Expected That The Cotton Consumption Market Of Major Cotton Consuming Countries In The Next Two Years

According to the analysis of the American industry authority, this is the early stage before 2024/25, and there is still a lot of time to wait for the market prospect to change. The current expectation is that the cotton output will increase in the next year, and the cotton available for consumption and export will also increase, but it is uncertain how much increased supply can be absorbed by demand.

After the impact of global inflation and high interest rates on the industry, countries began to adapt to these changes. Although the economic growth of the United States may slow down, the United States is the backbone of the clothing consumer market. At present, after a long period of high interest rates, the United States economy has avoided a recession. The International Monetary Fund estimates that the U.S. GDP will grow by 2.5% in 2023, 2.7% in 2024, and 1.9% in 2025. The GDP of the euro area will grow by 0.4% in 2023, and by 1.5% in 2024 and 2025. This shows that after the persistent recession worries, the terminal consumption prospects of these major countries and regions are beginning to stabilize. If the fear of economic downturn abates, retailers and brand owners may be more confident to increase purchase orders.

Similarly, if the cotton price can stabilize, it may also bring more confidence to the yarn mill and purchase more raw materials. After the sharp rise in 2021/22, the settlement price of ICE futures is actually only slightly lower than 75 cents, falling to 72 cents at the end of October 2022, and then rising to more than 80 cents most of the time. Due to the weak downstream demand during that period, cotton prices stabilized above the long-term average, which obviously made it difficult for cotton mills to bear, especially after the price collapse around the middle of 2022, which caused serious economic losses, and the shipping crisis extended the time of losses.

The sharp fall in the current cotton price may help the market form a clear bottom, which may eventually be conducive to the purchase of textile enterprises, because the space for cotton prices to continue to fall is limited, and the potential for the final market to rise is greater. The resumption of procurement interest is also reflected in the USDA's prediction that the cotton consumption of major cotton consuming countries will increase in 2024/25.

Recently, it was reported that the order volume of the textile supply chain has begun to increase, but in the geopolitical uncertainty and high interest rate environment, the recovery of demand is relatively slow and tortuous. The price direction will depend on the speed and intensity of demand recovery, which must match the increased output and export supply.