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SunSirs: Production and Demand Forecasts Boost, China's Cotton Rises Again (12.1-12.15)
December 16 2020 08:52:49SunSirs(Linda)

According to statistics from SunSirs, as of December 15, the average domestic lint spot market price was 14,842 yuan/ton, an increase of 240 yuan/ton from the beginning of December, an increase of 1.65%, and an increase of 12.98% year-on-year. USDA reduced global cotton stocks at the end of the period and increased consumption; textile enterprises' low-end and medium-end orders increased, and cotton yarns rose due to cost support. Global new crown vaccination is being carried out one after another, the market is optimistic about the recovery of consumption, and the active financial market has boosted cotton prices.

According to the December global cotton supply and demand forecast report released by the United States Department of Agriculture last week, in 2020/21, the global cotton ending stocks will be reduced by 3.9 million bales from the previous month due to reduced production and increased consumption. Global cotton production was reduced by 2.2 million bales, of which the US cotton production was reduced by 1.1 million bales; correspondingly, global cotton consumption was increased by 1.6 million bales to 115.6 million bales, a year-on-year increase of 13%. Among them, India's consumption increased by 1 million bales, and China increased by 500,000 bales. Global cotton ending stocks are expected to be 97.5 million bales, a decrease of 1.9 million bales year-on-year.

On the other hand, U.S. cotton export contracts have increased significantly. The latest U.S. Cotton Export Weekly Report shows that from November 27 to December 3, 2020, the net amount of upland cotton in the United States in 2020/21 will be 91,400 tons, an increase of 45% from the previous week and an increase of 61% from the average of the previous four weeks. The main buyers are China 36,000 tons and Pakistan 17,200 tons.

(Data source: National Cotton Market Monitoring System, China Cotton Net)

With multiple favorable blessings, cotton prices at home and abroad have shown an upward trend. Due to domestic concerns about the epidemic in India, the launch of new cotton has accelerated, and the daily market volume has increased to 250,000 to 300,000 bales, and cotton prices have not risen but fallen. As of November 30, India’s new cotton market was about 9.2 million bales, an increase of 40% year-on-year. It is expected that the new cotton market will reach 45%-50% of the total output by the end of December. If there is no significant increase in export demand, the purchase price of seed cotton will be short-term Under pressure.

(Data source: National Cotton Market Monitoring System, China Cotton Net)

Domestic and foreign cotton yarn prices fluctuate little, and the price adjustment range is less than 0.5%. The price gap between China and India has narrowed, and outer yarns have generally been adjusted upwards, among which Indian yarns have risen the most. Due to the increase in the cost of cotton, yarn mills are considering increasing the ex-factory price. According to the statistics of the business agency, the ring-spun pure cotton yarn (21S, 32S) in Shandong is partly increased by 300-1500 yuan/ton. The downstream grey fabric market has a stable operating rate, and some markets have improved, and cotton yarn has shown an upward trend in the short term.

SunSirs analysts believe that with the continuous promotion of new crown vaccination, the short-term international financial market is actively improving. The decrease in cotton volume and the increase in demand and the rebound in textile orders provide basic support for the rise in cotton prices. On the other hand, considering the appropriate replenishment of textile enterprises at the end of the year, cotton prices are likely to rise and hardly fall in the short term.

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