Cotton Encounter “Waterloo” Cotton Surplus “Cloud Capped”
Author: May 20, 2011 15:35
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Now it entered the early summer, and it heat up day by day. But cotton market is on the contrary, it cools down continually. Such a contrast highlighted the recent depression in the cotton market. Recently, commodity price marked down wholly, and the cotton price also falls continually. Cotton spot goods market is depressed, and the Waterloo typed fall further aggravated the panic emotion, business men are pessimistic on the aftermarket.
Cotton market Waterloo
After a crazy jump in 2010, now enter into the sorrow situation of 2011. In the protophase, the 36000CNY cotton price that the merchants forecasted has become a bubble. Currently, the fall news is frequent, lint cotton spot market price marked down once and again. After the big price jump last year, super major cotton merchants confirmed the gap domestically. Domestic big cotton merchants are capable to stockpile for they have big money. While recently, commodity price marked down greatly, result in a failure to the cotton merchants. As for weak cotton merchants, they undersell the cotton in panic while strong cotton merchants confirmed the high quality cotton demand gap and the lint cotton market price is in a mess. Currently, the forth grade small bale quotation is at 22500-23000CNY/t. The third grade Xinjiang cotton is priced at 27000-28000CNY/t, the drop amount has reached 4000-5000CNY. As the market leader, Weiqiao market reduced cotton takeover price. Now its third grade is priced at 23500CNY/t, 429 grade is 23200CNY/t, 427 grade is 22800CNY/t. From the below graph, we can see that since April, 2011, lint cotton take over price fall like the waterfall.
See from cotton fundamentals, on one hand, supply remains relatively loose. Now the world’s major cotton producing countries, China, India, and America, the output will increase in the new year, and it is expected a great relief to the cotton supply. Under the high price influence, the cultivating area in America and India is expanded, and the intense supply situation will be eased. On the other hand, demand is still low; cotton yarn is piled up in plants. Cotton price rebound will be hard without end demand, thus its downward trend will go on.
Cotton yarn oversupply
Cotton production over supply led to raw material supply in tense. The later period of over production is cotton yarn over supply. Currently, cotton yarn price fall likes waterfall. With the force of advanced order and high cotton price, spot goods is unsalable ever since, cotton yarn spinning plants, big or small, overall the country piled up stock in their warehouse.
According to survey, cotton yarn in Jiangsu and Zhejiang market still fall greatly. Now, 40S carded yarn (EXW price, invoiced, the following is the same) is priced at 36000CNY/t; 32S combed yarn is quoted at 38000-39000CNY/t; 40S combed yarn is quoted at 40000CNY/t. The drop amount is add up to 4000-5000CNY. 32S carded yarn in Shengze market is quoted at 34700CNY/t, 40S carded yarn is quoted at 36000CNY/t, 32S combed yarn is quoted at 41000CNY/t, 40S combed yarn is quoted at 421000CNY/t, the fall amount in compare with April is near 2000CNY/t.
Recently, pure cotton yarn and greige are marked to sell out, but the turn over is not as good as expected. Currently, textile and garment sale is depressed. Orders are lessened, market flow slowed down, and domestic sale force weakened. Under the pressure of low cost and end demand reduced, pure cotton yarn is probably to fall.
State control requires soft landing
Based on healthy development, textile enterprises are aimed to shrink the production through the depressed period, thus maintain lint cotton price in proper area. The state announced the Cotton Temporary Storage Plan, the lowest storage price is priced at 19800CNY/t, which gives way to both cotton farmers and textile enterprises. The government is aimed make a natural price transition for new and old cotton. If the market slacked, through buy in by the government, the market can be stabilized. Obviously, such a method makes the previous high price in bubble, and also accelerated cotton downward trend.
Aftermarket forecast
Under multiple pressures, China’s cotton market is withstanding a sensitive stage, cotton price is almost as scary. Poor cotton price transmission is directly showed out on orders of enterprises. Now orders in most textile enterprises slide greatly in compare with previous years. Domestic cotton need is not as high as people expected, on the contrary, supply is relatively loose, adding up with the poor sale both upstream and downstream, it accelerate cotton price down.
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Editor: Candy From: 168Tex.com
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