SunSirs: Turning Fast in Early May, Chinese Cotton Fell First and then Rose

According to SunSirs statistics, as of May 11, the domestic lint cotton spot market average price reported at 11,581 yuan / ton, up 0.59% from the beginning of the month and down 25.66% year-on-year. During the May Day Holiday, due to US remarks, the market was once very worried about Sino-US trade relations, and ICE cotton fell sharply. The domestic lint made up after the holiday, and Zhengzhou cotton main contract once fell below the 10,000 mark. The Chinese Deputy Prime Minister and the US trade negotiators talked to reverse the situation.

During the May Day Holiday, US President Trump threatened to impose tariffs on Chinese products, and the market saw the first section of the Sino-US agreement as dangerous. From May 1st to May 5th, ICE cotton fell for three consecutive days. The main July contract fell from 57.33 cents to 53.58 cents, a decrease of 6.5%. On May 6, Zhengzhou cotton’s main contract was at a minimum of 11,170 yuan / ton, a decline of 2.20 yuan / ton on that day, and the average spot price was at a minimum of 11,400 yuan / ton, a decrease of 0.98%. As can be seen from the current schedule, Zhengzhou cotton only fell sharply on the first working day after the holiday, and then rose sharply. Most of the spot is sandwiched between the recent contract and the main contract, and the spot volatility is small, around 11,500 yuan / ton, and the range of adjustment is 150 yuan / ton. The downturn did not last long, and the turning point soon came.

According to public reports, the leaders of both sides in the high-level Sino-US economic and trade consultation on May 8 made the first call after signing the first-stage economic and trade agreement. The two sides stated that they should strengthen macroeconomic and public health cooperation, strive to create a favorable atmosphere and conditions for the implementation of the first phase of the Sino-US economic and trade agreement, and promote positive results. Both parties agreed to maintain communication and coordination. The previous worries have disappeared, and ICE cotton continued to rise.

On the other hand, the US cotton export weekly report has considerable data, and China's signings have increased significantly. On April 17-23, 2020, the net contract amount of U.S. upland cotton for 2019/20 was 98,600 tons; the net contract amount of April 24-30, 2020 was 84,000 tons, and China added 95,800 tons and 49,300 tons in two weeks respectively.

Chinese textile exports have picked up and demand has risen slowly. According to the latest statistics from the General Administration of Customs of China, in April 2020, China's textile and apparel exports amounted to US $ 21.361 billion, an increase of 38.43% from the previous month and an increase of 9.77% from the same period last year. Among them, the export value of textiles (including textile yarns, fabrics and products) was US $ 14.6207 billion, an increase of 49.36% year-on-year; the export value of apparel (including apparel and clothing accessories) was US $ 6.7399 billion, a decrease of 30.31% year-on-year.

In terms of cotton yarns, at the end of April, although the Indian textiles were partially reworked and yarn starts were low, downstream demand is also sluggish, and yarn prices may stop falling. Indian cotton prices have fallen sharply due to insufficient transactions. Some analysts believe that Indian cotton prices may fall by about 10%. Pakistan's textile mills have started working one after another, and the government has allowed some textile mills to process export orders, and cotton yarns have picked up. Last week, the price of 30 carded yarns in Pakistan rose by 3.23% and the export price of Pakistani yarn rose by 2.75%. As of May 11, the average price of 32 ring-spun cotton yarns in Shandong reported 21,250 yuan / ton, down 2.86% from the beginning of the month. Downstream demand was weak. After the substantial price reduction, some companies extended their holidays in order to reduce costs. Foreign textiles have resumed work one after another.

With the gradual relaxation of the foreign pandemic blockade and the easing of Sino-US relations, textile production and sales and cotton demand are showing signs of improvement. The signing of a large number of US cotton signed by China has ushered in a slow recovery for textile companies. SunSirs analysts believe that the spot price fluctuates around 15,000 yuan / ton, with a small amount of transactions, holding prices on the sidelines. Looking at the futures cotton, although the process has twists and turns, prices have risen overall. The slowdown of Sino-US trade relations is a positive signal, demand is gradually picking up, and cotton prices are expected to show an upward trend.

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