No Boost Factors on Fundamentals Cotton Price Will Continue Downward
Author: May 27, 2011 10:32
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After several rounds of oscillation of the callback, the current cotton decline amount is about 23%, basically keep on line with the level of November last year.
Futures and spot basis justified
With the fall of cotton futures, cotton spot goods market fall since the beginning of March, 328 grade cotton spot goods price has fallen from the peak 31228CNY/t to 24606CNY/t, the fall amount is about 21%. Currently, cotton spot goods price has fallen below futures price. Basis gradually justified. Since the middle term of May, cotton futures price is mainly kept at 24000-25000CNY/t. Spot goods price fall speed is slowed down.
With the basis justified, meanwhile, counting on the global supply tension, we believe cotton price will be stabilized temporary.
Textile industry weak demand still
Cotton futures price continue to fall, which made the market doubt the cotton gap theory. In the later period of cotton price rising, cotton merchandise reluctant to sell the goods on one hand, on the other hand, high priced cottons are rejected in the down stream market. Textile enterprises adjust the ratio of textile raw materials and by other methods to reduce the amount of cotton used. Spot goods market is depressed, turning over low. With the intensification of decline, the market worries spread to the downstream cotton yarn and greige market. By the mid term of May, KC32S is priced at 33050CNY/t, reduced 5670CNY/t, namely 12% in compare with February.
The price drop led to sluggish sales of textile industry. On one hand, finished cotton products inventory high in every weaving plant, on the other hand, due to sluggish sales, capital returns difficult, combined with monetary policy tightening, enterprises began to limit production or even stop production, operation fall into difficulty.
Domestic demand sluggish, meanwhile, textile industry also faces competition from the foreign markets. The overall cost increased for the material, labor force and power tension, the domestic textile products price advantage has been weakened. Especially when the material prices fluctuate greatly, domestic textile enterprises dare not to do long term, big amount orders. The data indicates, export amount in the southeast countries like Indonesia, Vietnam and etc increased dramatically, with increase of 25% and 30% respectively.
June and July is the traditional slack season of textile industry. The downstream demand is estimated to have no big changes.
The national policy brings pressure to the market
Although, the government has increased deposit reserve rate to inhibit liquidity, see from the situation in May, food price like meat, vegetable and etc still has the room to rise up. With the drought continue, food price increase will be continued, CPI is expected to mount up. Under the high pressure of inflation, there will be another policy to inhibit liquidity at home，thus the market get another pressure.
In addition, the rumor of textile export rebate from 16% lowered to 11% is spread again. Although it had not confirmed by relative department, experts say it is in accordance with China’s trade develop trend. If the rate is lowered, it will be in June or July. Once the tax rebate is lowered, some middle sized or small sized export oriented enterprises will suffer from a huge challenge, which will also give a shock to the cotton price.
See on general, cotton market still lacks clear direction. Technically, cotton price is expected to rebound after the readjustment this time. See on the general domestic economy and cotton spot goods, there is not much favorable factors to boost cotton price up. Cotton price is expected to wait for a breakthrough in the oscillation pattern of opportunities.
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Editor: Candy From: 168Tex.com
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