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SunSirs: Expectation of Trade Negotiation Influences Cotton Market

December 12 2019 14:11:38     SunSirs (Linda)

According to the price monitoring of SunSirs, as of December 11, the average price of grade 3128B cotton lint in the domestic spot market was 13,113RMB/ton, basically the same as that of the beginning of December. It seems that the price hasn't changed in two days, but the process is ups and downs. Market fluctuates obviously with the expectation of Sino US trade negotiation, and cotton price first falls and then rises.

On December 2, China national reserve cotton Management Co., Ltd. began its rotation into Xinjiang cotton, the first restart six years after the end of temporary storage. According to

data statistics, as of December 10, the lowest price and the highest price of reserve cotton turnover were 12,879RMB/ton and 13,319RMB/ton respectively. During the transaction, the lowest price difference between domestic and foreign cotton prices is 313RMB/ton, and the highest price difference is 532RMB/ton.

Due to trump's tough stance at the beginning of the month, he said that he may not reach an agreement with China before the 2020 presidential election. The atomosphere is strong in the market. As of December 4, the international cotton index (SM) was 78.31cent/pound, down 116 points from November 29. At the same time, according to the US weekly cotton export report, the contracted volume of us upland cotton on November 22-28 was 37,100 tons, 42% less than the previous week, and the loading and transportation volume of us upland cotton in 2019 and 2020 was 10% less than the previous week, 37,800 tons, with the international cotton price under pressure. (December 1- 5)

On December 6, the market turned around. China and the United States have actively communicated with each other to try to avoid a full-scale tariff increase on December 15. Then, the Tariff Commission of the State Council of China announced that domestic enterprises can import a certain amount of goods from the United States through market-oriented purchase independently according to market demand. According to the application of relevant enterprises, follow-up or carry out the work of tariff elimination for some goods, and positive signals make cotton prices rebound. On the other hand, the U.S. Department of Agriculture released the global production and demand forecast in December, the global beginning inventory and production and consumption decreased, including 900000 packages of beginning inventory decreased, 1.2 million packages of global cotton consumption decreased, and 1 million packages of China consumption decreased. The reduction of market consumption is greater than that of inventory, and the problem of supply exceeding demand is still prominent. The price of cotton is limited, and the market tends to be volatile. (December 5- 10)

According to the price monitoring of SunSirs, as of December 11, 2019, the average price of 32S pure cotton yarn for knitting in Shandong was 21,920RMB/ton, down 0.27% from the beginning of the month, down 11.34% year on year. At the beginning of December, the demand for grey cloth and fabric in the downstream is still weak. The manufacturers insist on buying the raw materials as they are used, and the cotton yarn orders are small. Secondly, in order to get rid of the stock as soon as possible, grey cloth enterprises continuously reduced their prices. Since the second half of this year, the price of pure cotton grey cloth has continued to fall, mostly between 5-8%. The reduction of downstream profits has resulted in the rise of cotton price and the difficulty of rising yarn price. The reduction of orders, so that small and medium-sized mills to make plans for early holidays, transactions generally preferential.

The weak downstream demand makes the circulation of the industrial chain cautious. The factories use and buy as they use, and the terminal demand becomes the key to the pricing of the mills. As cotton is a futures commodity, the price adjustment ability is slightly strong, and the position of the mill is embarrassed, the prices are basically falling this year. Analysts from the business club believe that cotton prices were depressed first and then raised in early December, and the market was mostly subject to the expected fluctuation of Sino US trade negotiations. Most people believe that the substantial improvement of the trade pattern can make the market breakthrough. Cotton prices have been stable and volatile in the near future. The market is concerned about the progress of negotiations. A new turning point will appear in the cotton market on December 15.

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