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SunSirs: Cotton price lows are still refreshing, falling 3.20% from the end of the last 4 years (March.24)
March 26 2020 08:29:14SunSirs(Linda)

According to statistics from SunSirs, as of March 24, the average domestic cotton lint spot market price was 11,320 yuan / ton, down 13.66% from the beginning of the month, and down 27.51% year-on-year. A new low since March 30, 2016, a decrease of 3.20% from the lowest point in 2016, which is also the lowest price since 2011 when the business agency monitored cotton prices. Due to the outbreak of public health events around the world, the escalation of protective measures in many countries, the closure of borders, ports, and so on, the cotton market is more bearish. As cotton prices have fallen too quickly, textile mills have waited and waited and purchased less.

On March 24, Zhengzhou cotton's main contract 2005 closing price was 10,360 yuan / ton, which was 2.08% lower than the price of the previous trading day, with the lowest reported at 9,935 yuan / ton. Compared with the beginning of March, it has dropped by 2030 yuan / ton, a decrease of 16.38%.

On the macro level, on March 23, President of the International Monetary Fund (IMF) Georgiyeva predicted that the global economy would fall into negative growth in 2020, and the degree of recession would be at least equal to or even more severe than that of the 2008 financial crisis. It is expected to recover in 2021. The crisis of the textile supply chain has spread to the global scale, and the price of outer yarns has fallen, indicating that the inventory is difficult to digest. On the other hand, multi-country protection measures have been upgraded. As a domestic consumer, textile mills have expressed concern that the government may require companies to shut down and stop production. The suspension of production will be a fatal blow to the local textile industry, and orders will be forced to be cancelled.

On March 22, China Reserve Cotton Management Co., Ltd. announced that due to the difference between domestic and foreign cotton prices having exceeded 800 yuan / ton for three consecutive working days, the collection and storage work was suspended again. This is also the second time in March that Xinjiang Cotton Round was suspended. The price of foreign cotton has fallen too fast, but domestic cotton yarn companies are still watching. The price is firm. The domestic lint cotton spot cost is higher than imported cotton. The decline is more conservative and cautious. After triggering the suspension mechanism, the cotton price trend was basically the same. Zhengzhou cotton and spot stocks made substantial losses. Zhengzhou cotton once fell below the 10,000 mark and rebounded somehow.

Cotton prices fell to new lows, and cotton yarn pricing fell into chaos. According to the monitoring of the business agency data, yarn prices in Shandong remained stable, but the market reference value was small. What the market is facing now is not the issue of quotation, but the transaction. The cliff-like decline in raw materials has left the mills unable to respond. Yarns cannot be sold. The pressure brought by the high-priced stocks of raw materials cannot be absorbed. Some companies have lowered their prices, and the decline is expanding, but it has not achieved the effect of stimulating downstream purchases. Some companies simply do not adjust their prices because market demand is poor and there are no orders to lower prices and they do not know where the market expects. It is expected that when the yarn price goes down and the market is active, the price bottom will appear.

SunSirs analysts believe that the market is always watching the impact of the epidemic on the market, bearish is the theme, the bottom is unknown. Cotton prices continue to fall, domestic yarn mills withdraw from the market and wait and see. Not many transactions have forced cotton prices to fall further. In 2020, a new low will be witnessed.

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