Market Analysis: Cotton Prices Fluctuate And Downstream Orders Do Not Improve

Since February, Zheng Mian has continued to fluctuate and fall after rising to the key resistance level of 15100 yuan/ton, and the spot price of cotton has fallen rapidly. During this period, the production profit of some textile enterprises gradually decreased. Although the orders of downstream textile enterprises have rebounded recently, the explosive growth expected by the market has not occurred. The current cotton market dynamics have not fulfilled the strong expectation of market demand rebound before the Spring Festival.

Weak domestic cotton price shocks

As of February 24, 2023, the national average price of 3128 lint cotton is 15309 yuan/ton, down 0.49% on a weekly basis. The price of 3128B machine picked cotton in Xinjiang market is 14600-14700 yuan/ton, and the price of hand picked cotton is 14750-14950 yuan/ton; The price of 3128B machine picked cotton in the mainland market is 15200-15400 yuan/ton, and the price of hand picked cotton is 15400-15600 yuan/ton. At present, there are not enough new orders received in the downstream, and when Zheng Mian fell sharply in the early stage, textile enterprises basically replenished the inventory to the normal level, and the subsequent cotton procurement momentum is insufficient, the spot transactions in the market are light, and the price support is weakened. Cotton prices in Xinjiang remain weak and stable in the short term.

Decrease in immediate profits of downstream textile enterprises

According to Mysteel agricultural product data monitoring, as of February 24, the spot profit of national C32s ring spinning was 1410.1 yuan/ton, which was lower than that of the previous month. Most orders in the domestic textile market have not improved. After a short correction in cotton prices, the expected recovery of the market has pushed Zheng cotton prices up, but the recovery of downstream demand is still slow. The spot price of domestic cotton has declined slightly, and the upward trend of futures prices is relatively weak. Downstream enterprises generally focus on rigid demand procurement, with a strong wait-and-see mood, and domestic cotton yarn quotations have stabilized from falling.

The inventory of finished products of downstream cotton mills returned to normal

According to the latest survey data of some textile enterprises with more than 50000 spindles in six regions of the country by Mysteel cotton team, as of February 24, the yarn inventory of textile enterprises in major regions of the country was 19.6 days, 0.6 days less than that of last week, 2.97% less than that of last week, and 21.91% less than that of last week. Downstream textile enterprises reduced the number of days of inventory discount, spinning profits were near the average, cotton yarn trading did not change much, the market mentality was more cautious, and textile enterprises bought at bargain prices. Xinjiang Kashi and Aksu have opened special trains for cotton yarn transportation, greatly reducing the time for cotton yarn transportation, and the yarn inventory of textile enterprises is at a normal level.

To sum up, with the coming of the "three gold and four silver" season in the textile industry, the market still hopes for the recovery of terminal demand; At present, the follow-up of textile enterprises' subsequent orders is not as expected, and the terminal procurement is also wait-and-see and on-demand. The overall market activity is not high, and the overall market trading atmosphere is weak. It is expected that the domestic cotton price will remain weak and volatile.