Price trend

Last week, domestic cotton prices continued to rise, although the increase was slightly smaller. International cotton prices continued to fall, and the price difference between domestic and international cotton reached a new ten-year high. According to SunSirs' commodity market analysis system, as of February 2nd, the spot price of 3128B grade lint cotton was 16,090 RMB/ton, a 0.58% increase compared to the previous Monday.

Market analysis

Domestic sales of new cotton were progressing rapidly, and downstream textile companies were actively replenishing their inventories. Ginning and trading companies had a strong willingness to maintain prices, resulting in firm spot prices. As of January 29th, the national sales rate of new cotton was 64.5%, a year-on-year increase of 22.9 percentage points..

Last week, international cotton prices came under pressure and fell, at one point reaching their lowest level in nearly ten months. The average weekly settlement price of the ICE cotton futures main contract was 63.44 cents/pound, a slight decrease of 0.64 cents/pound compared to the previous week, representing a 1.0% decline.

Driven by the "strong domestic, weak international" trend, the average weekly price difference between domestic and international cotton had widened to nearly 3,200 RMB/ton, reaching a new high in the past decade. This gives imported cotton yarn a significant cost advantage compared to domestically produced cotton, continuously eroding the market share of domestic cotton and putting significant downward pressure on domestic cotton prices.

Downstream market: In January, the unsaturated resin market saw price increases, driven by rising prices of raw materials such as maleic anhydride and styrene, providing cost support. However, downstream industries experienced weak order volumes, with purchases mainly driven by immediate needs. Towards the end of the month, downstream companies gradually shut down for the holidays, making proactive stocking and purchasing unlikely. Many adopted a wait-and-see approach regarding resin price increases, and no significant improvement is expected before the Chinese New Year holiday, resulting in limited trading volume.

Comprehensive analysis

Overall, current cotton prices were in a fierce battle between "strong expectations" (of future production cuts) and "weak reality" (the off-season for demand). The expectation of reduced production in the new year continued to fuel bullish sentiment in the market, providing ongoing support for cotton prices. However, as the Lunar New Year approaching, the market will be dominated by "weak reality," and cotton prices are expected to fluctuate within a narrow range or trend slightly weaker, lacking upward momentum.

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