In July, due to the continuous high temperature weather in the main cotton areas in China, the new cotton production is expected to support the continued high cotton prices, and the spot prices have reached a new annual high, and the China Cotton Price Index (CCIndex3128B) has risen to a maximum of 18,070 yuan/ton. The relevant departments issued an announcement that in order to better meet the cotton needs of cotton textile enterprises, the 2023 cotton import sliding tax quota will be issued, and the sales of some central reserve cotton began in late July. Internationally, due to adverse weather disturbances such as high temperature and rainfall, new cotton production in the northern Hemisphere is expected to increase, and cotton prices have risen significantly, but under the influence of economic recession expectations, there has been a wide shock trend, and the increase is less than domestic, and the difference between domestic and foreign cotton prices has expanded.
I. Changes in spot prices at home and abroad
(1) The domestic spot price of cotton rose to the highest level of the year
In July, affected by factors such as the expected increase in production reduction due to high temperature weather in the cotton region and tight supply expectations, domestic cotton prices maintained a strong trend, and Zheng cotton futures continued to rise to drive domestic cotton spot prices higher, the 24th China cotton price index rose to 18,070 yuan/ton, a new high since this year. Within the month, the tax quota and reserve cotton sales policy have been announced, basically in line with market expectations, the superimposed demand side is weak, and the cotton price has a brief correction at the end of the month. On the 31st, China cotton price index (CCIndex3128B) 17,998 yuan/ton, up 694 yuan from the previous month; The average monthly price was 17,757 yuan/ton, up 477 yuan month-on-month and 1101 yuan year-on-year.
(2) long-staple cotton prices rose month-on-month
In July, the price of domestic long-staple cotton rose from the previous month, and the transaction price of 137-grade long-staple cotton at the end of the month was 24,500 yuan/ton, up 800 yuan from the previous month, higher than the China Cotton Price Index (CCIndex3128B)6502 yuan, and the price difference expanded by 106 yuan from the end of last month. The average monthly transaction price of 137-grade long-staple cotton is 24,138 yuan/ton, up 638 yuan from the previous month, and down 23,887 yuan year-on-year.
(3) International cotton prices hit a new high in the past six months
In July, international cotton prices remained in a wide range of 80-85 cents/pound. Frequent weather disturbances in many major cotton producing countries in the northern Hemisphere, increased expectations of new annual supply contraction, and futures market prices once rushed to 88.39 cents/pound, a nearly half-year high. July ICE cotton main contract monthly average settlement price of 82.95 cents/pound, month-on-month (80.25 cents/pound) up 2.71 cents, or 3.4%. China’s imported cotton price index FCIndexM monthly average 94.53 cents/pound, up 0.9 cents from the previous month; At the end of 96.17 cents/pound, up 1.33 cents from the previous month, the 1% tariff was discounted by 16,958 yuan/ton, which was lower than the domestic spot of 1,040 yuan in the same period. At the end of the month, due to the failure of international cotton prices to continue to rise, domestic cotton maintained high operation, and the difference between internal and external prices expanded again to about 1,400 yuan.
(4) Insufficient textile orders and cold sales
In July, the textile market off-season continued, as cotton prices rose, enterprises raised cotton yarn quotes, but the acceptance of downstream manufacturers is not high, yarn sales are still cold, finished product inventory continues to increase. At the end of the month, home textile orders improved, and the probability of a slight recovery. Specifically, the transaction price of pure cotton yarn KC32S and combed JC40S at the end of 24100 yuan/ton and 27320 yuan/ton, up 170 yuan and 245 yuan respectively from the end of last month; Polyester staple fiber at the end of 7,450 yuan/ton, up 330 yuan from the end of last month, viscose staple fiber at the end of 12,600 yuan/ton, down 300 yuan from the end of last month.
2. Analysis of factors affecting price changes at home and abroad
(1) Issuance of cotton import sliding duty quotas
On July 20, the National Development and Reform Commission issued an announcement, in order to protect the cotton needs of textile enterprises, after research and decision, the recent issuance of 2023 cotton tariff quota outside the preferential tariff rate import quota (hereinafter referred to as the “cotton import sliding tariff quota”). The issuance of cotton non-state trade import sliding tax quota of 750,000 tons, without limiting the way of trade.
(2) Sales of part of the central reserve cotton will be organized in the near future
On July 18, the relevant departments issued an announcement, according to the requirements of the relevant state departments, in order to better meet the cotton needs of cotton spinning enterprises, the recent organization of sales of some central reserve cotton. Time: Starting from late July 2023, the legal working day of each country is listed for sale; The number of daily listed sales is arranged according to the market situation; The listed sales floor price is determined according to the market dynamics, in principle, linked to the domestic and foreign cotton spot prices, calculated by the domestic market cotton spot price index and the international market cotton spot price index according to the weight of 50%, and adjusted once a week.
(3) Unfavorable weather is expected to lead to tight supply of new cotton
In July, India and the United States respectively faced adverse weather disturbances such as local heavy rain and persistent high temperature and drought in Texas, among which the United States cotton in the planting area of a significant reduction, the current drought combined with the upcoming hurricane season makes the production reduction concerns continue to increase, forming a stage support for ICE cotton. In the short term, the domestic cotton market is also worried about the production reduction due to the continuous high temperature in Xinjiang, and the main contract of Zheng cotton exceeds 17,000 yuan/ton, and the spot price increases with the futures price.
(4) Textile demand continues to be weak
In July, the downstream market continued to weaken, traders cotton yarn hidden inventory is large, grey fabric link boot low, textile factories are cautious about raw material procurement, most waiting for reserve cotton auction and quota issuance. The spinning link faces the problem of loss and backlog of finished products, and the price transmission of the industrial chain is blocked.
Post time: Aug-15-2023
