Textile companies have insufficient orders for low cotton prices

The main Zheng 1505 contract in the near future basically maintained at 12,700 yuan / ton -13,200 yuan / ton range of shocks, the impulse energy in the vicinity of 13,200 yuan / ton feel even more pressure. As for the future trend of cotton prices, the author believes that there has not been any significant improvement in the current textile consumer market, and the supply of new cotton has gradually increased. It is expected that cotton prices will continue to fluctuate in the short-term, and the long-term is still bearish.

According to the survey data of China Cotton (12850, -10.00, -0.08%) Information Network, as of the end of November, the inventory of textile enterprises in the warehouse was 501,000 tons, an increase of 18,600 tons from the previous month. Among the companies surveyed, 37% reduced cotton stocks; 44% increased cotton stocks. The disposable cotton inventory of textile enterprises was 676,100 tons, an increase of 22,400 tons from the previous month.

The main reasons for the increase of stocks of cotton in stocks and disposable inventories are as follows: As the end of the year approaches, some textile companies have recently increased the procurement of Xinjiang cotton in order to obtain quotas, so that more Xinjiang cotton purchasing work can be completed by the end of December. Acquiring more cotton quotas; Xinjiang's new flowers have come out of Xinjiang one after another, and some of the mainland's land banks have increased Xinjiang cotton. Spinning companies have purchased high-quality new flowers one after another in order to prevent the quality of cotton coming into the market from falling. The price of cotton is relatively stable and remains low, and the willingness of textile enterprises to purchase raw materials increases. Even so, the current industrial inventory of textile companies is still low, indicating that the textile consumption in the downstream of cotton is not optimistic.

Look at the current start-up situation of textile enterprises, according to the survey data of operating rate in November, the current average operating rate of the above-scale textile enterprises is 81%, lower than 89% of the operating rate of the same period last year. Comparing with the operating rate of textile enterprises in the past two years, it can be seen that the operating rate in 2014 was lower than the same period of last year except for the first two months. The reason for this is that nearly 50% of the companies stated that it was because of insufficient orders.

Xinjiang spot cotton sales are difficult, further reflecting the weakness of consumption. At the cotton situation analysis conference held in Beijing on the 16th, Liang Liangdong, vice chairman of the XPCC Cotton Association, said that currently the Corps’ cotton processing volume reached 67% of the expected production, with more than 1.1 million tons of stocks and 250,000 tons of sales. The total output is 13%-14%. This year's sales rate is lower than historical levels, and sales have increased a lot of pressure. More than 60% of the Corps is machine-picked, and the Northern Xinjiang hand-picked basic sales are completed. The latter step will continue to increase the sales of machine-picked cotton. The current problems faced by the XPCC's cotton sales: Transportation is difficult, and the cost of transportation for new flower vehicles has risen dramatically. Difficulties in sales, target prices protect the interests of cotton farmers, but it is difficult to manage them.

The difficulty in sales of the XPCC cotton basically also reflected the opinions of all the cotton processing companies in the market, and further reflected the current weakness in textile consumption.

On the 16th, the Ministry of Finance issued a document, starting from January 1, 2015, China adjusted its import and export tariffs, and continued to impose a quasi-adjusted tax on the import of a certain amount of cotton for customs duties and quotas. The tax rate remained unchanged. This news is different from the previous quota issued by the head of the relevant department. The adjustment of import policy actually relaxes the entry threshold for textile companies without import quotas. Under the current situation where the difference between cotton prices inside and outside China is further narrowed, foreign cotton is expected to fall to a certain extent or it will stimulate the import enthusiasm of domestic textile companies.

According to statistical data, as of December 18, the domestic and foreign price spreads were discounted at -67 yuan/ton under the sliding tariff, and 1% tariff quotas were spread at 2347 yuan/ton.

In summary, under the current background that cotton textile consumption in the downstream is still not showing signs of improvement, it is expected that the cotton price will continue to fluctuate under pressure in the later period. However, under the support of “good cotton is hard to find” and the supplementary store before the Spring Festival, the space for short-term downside is expected to be limited. However, the lack of orders is still the “culprit.” Until this fundamental issue is not effectively resolved, it is expected that cotton prices will remain bearish in the medium to long term.