Market Analysis: Upstream Supply Pressure Will Continue, And Cotton Prices Still Have Pessimistic Expectations

At present, the operating rates of weaving mills and cloth mills are at a stage high level, but due to the limited downstream order increment, the overall demand is weak, and the operating rates of the industrial chain are lower than those in previous years. According to the data of TISCO, as of March 21, the operating rate of the sample spinning mills had recorded 76.2%, down 0.3 percentage points month on month and 6.7 percentage points year on year; The operating rate of the sample weaving factory also increased to 42.1%, 0.6 percentage points higher than the previous month, and 20.2 percentage points lower than the previous year.

The quality of "three gold and four silver" is not as hot as expected by the market, and the characteristics of peak season are not obvious. Hong Runxia, general manager of the Yangtze River Futures Cotton Textile Industry Service Center, said that the data in January 2025 showed that all kinds of textile and clothing imported by the United States from the world and China had double-digit year-on-year growth, and the market share of China's cotton products in the United States rebounded to 16.6%, higher than that in 2022-2024. The main factor may be that American importers "scrambled for imports" before Trump took office, The specific impact also depends on the subsequent tariff policy and consumer demand and other factors. At present, the "three gold and four silver" shows a general performance, showing the characteristics of "low peak season".

In terms of inventory, the current cotton yarn inventory of textile enterprises is at a low level, with 16.6 days and 29.2 days in the fabric warehouse, which is at a low level over the years. At this stage, the trading atmosphere of the downstream pure cotton yarn market is weaker than that in early March. The downstream only maintains the just needed replenishment, and some overseas orders are gradually transferred to Southeast Asian countries. The market is cautious.

In fact, the introduction of various policies to boost consumption through policy implementation will form a strong boost to the cotton textile industry.

Several measures have boosted the consumption expectation of cotton textiles to a certain extent. Domestic demand has not been fully released, and there is still room for improvement. At the same time, at present, the domestic cotton textile industry is facing the dual pressure of reshaping the regional structure and "inner roll" competition, and the industry operation is under obvious pressure.

At present, the domestic economic drive is gradually shifting to consumption. However, at present, the specific consumption subsidies and other stimulus policies involve relatively little in the cotton textile industry, and the scope of subsidies needs to be further expanded in the future, so as to bring more confidence to the cotton textile industry.

On the whole, the policy of boosting consumption has a certain positive effect on the textile industry, but the impact on the industry is not immediate and may take a long time to release.

At present, the average profit of textile enterprises is low, especially small and medium-sized textile enterprises, which are facing more serious challenges due to shrinking downstream demand, environmental protection, high manufacturing costs and other factors.

According to the data of Ganglian, the current spot spinning profit of the sample yarn mills is around - 800 yuan/ton, which is at a low level in the same period of previous years. The loss operation has brought down the yarn price. Although it can slightly boost the textile demand, the downstream low price replenishment is not active, because the demand of the terminal market is still recovering slowly.

Traditional advantageous industrial clusters are facing the urgent pressure of transformation and upgrading. The textile trade between China and Central Asia has shown a good momentum, which is expected to boost consumer demand with multiple measures.

At present, the main problems of the cotton textile industry are that the volume is serious, the consumption increment is limited, the profit is low, and it is difficult to promote the cotton price upward. In the long run, the probability of future supply easing is high.

In Bloomberg's view, due to the overall oversupply, it is difficult for cotton prices to rise significantly, but the space for decline is limited. The profitability of the industry is expected to remain stable, and it is difficult to achieve a good growth rate.

Looking forward to the future market, from the supply side, supported by the Xinjiang cotton target price policy, the domestic cotton planting intention in the new season is positive, and the cotton in the new season is still expected to have high yield, forming pressure on cotton prices; From the demand side, it still needs to be benefited after the expansion of domestic consumption subsidies, so as to promote the increase of terminal consumption and bring about the improvement of the profits of the industrial chain from downstream to upstream; Cotton textile exports need to pay attention to tariff policy changes.

On the whole, upstream supply pressure will continue to exist, and cotton prices still have pessimistic expectations; In the future, the breakdown of the industrial chain will focus more on the downstream, and the real consumption boost may be the "ice breaker" of the industrial chain.