Market Dynamics: Pay Attention To The Impact Of Cotton Capital And Intensify Short-Term Volatility

 　

The short-term downstream replenishment of cotton before the year is nearing the end, and the market continues to disagree on orders after the year. Quantitative funds rose strongly in the short term, hedging gradually entered the market, and the volatility of the market intensified.

Monthly difference: pay neutral attention to the 5-9 reverse arbitrage opportunities brought by short-term fluctuations, and treat 3-5 positive arbitrage with the idea of receiving goods.

Spot: The neutral short-term replenishment market has supported the spot price, and the sales basis of new cotton fluctuated in a narrow range. In the next two weeks, the downstream will gradually have holidays and the market will rise. It is expected that the basis sales will weaken.

Imported cotton: the import window of cotton inside and outside the air is still available, and the import volume reached 260000 tons in December. It is expected that the high import volume will continue.

Imported cotton yarn: more spring order demand varieties have a fast circulation speed, but the low count performance is poor.

Inventory: excessive 1) The inventory of raw materials and finished products of textile enterprises decreased slightly; 2) The removal of grey cloth inventory slowed down significantly, and the replenishment of raw materials reached a high level. Downstream replenishment is nearing the end.

Planting expectation in the new year: empty USDA reported in January that, globally, the output and consumption of 2023/24 will increase and decrease, and the ending inventory will increase significantly, leaving the overall impact empty; The output of American cotton continued to decrease, affecting the neutral and more.

Global terminal consumption: empty The inventory of clothing and clothing fabric wholesalers in the United States declined slowly and remained high (neutral). The share of China's cotton textile exports in Southeast Asia increased, but the share of Europe, America, Japan and South Korea declined (neutral). The operating rate of yarn in Southeast Asia and China declined (empty), and the price of yarn in the inner and outer disk was weak (empty).

Macro: neutral bias In China, the real GDP in 2023 will grow by 5.2% year on year, successfully reaching the annual target of "about 5%", and the economy will keep recovering in the fourth quarter with a slightly slower slope. The US fundamental data and the Beige Book reflect the demand side resilience. Federal Reserve officials pointed out that the market interest rate cut expectation was too fast, which made the market interest rate cut expectation adjusted significantly again.

China: quantitative funds exacerbate short-term fluctuations

05 Large increase of contract position drives the price

05 The sharp increase in contract positions drove the price of the market to rise sharply. The window period of "orders will be better after the year", which can not be falsified at present, gives macro funds the opportunity to do more, and breaks through the operation method of chasing more. In this process, the upper hedging is fully released, exacerbating short-term fluctuations.

As the increase in position was concentrated on the 05 contract, 5-9 went out of the normal market and paid attention to the opportunity of price difference.

Price difference between months: 3-5 positive sockets are dominant, and 5-9 price difference opportunities are focused

In May, the basis was 686 yuan/ton, which shrank sharply due to the strength of the market.

Considering that there is no risk arbitrage during the month, 3-5 is hedging before - 50 to - 30, and there is a strong margin of safety. Under the background of low sales basis, this strategy also superimposes the strategy of base copy.

5-9 The price difference shrinks sharply after the sharp increase of position in 05, and attention should be paid to the reverse entry opportunities within - 100.

The cotton consumption in December was at the annual average level:

In December, the commercial inventory was 5.53 million tons, including 4.4149 million tons in Xinjiang, 886600 tons in industrial inventory, and 595400 tons in consumption.

As of January 18, 2024, the annual inspection weight of national cotton processing enterprises in 2023 is 5.2849 million tons. The cumulative processing volume of Xinjiang lint is 5.3292 million tons.

BCO's latest report estimates that Xinjiang cotton is 5.481 million tons, and 409000 tons in the mainland.

The port inventory is high, and it is expected that the subsequent high import volume will continue to maintain:

China will import 1.43 million tons of cotton in 2022/23, 260000 tons in December, 1.1 million tons in 2023/24, and nearly 50% of Brazilian cotton.

The price difference between the inner and outer panels narrowed to 2731 yuan/ton; Under sliding allowance tax, the price difference between internal and external cotton is 444 yuan/ton, which can still give import profits. It is expected that the import of external cotton will continue.

Downstream load: startup maintenance

As of January 19, the startup load of cotton yarn factory was 50.4%, and the startup of textile enterprises was maintained. The startup rate of cotton cloth was 53.2%, and the cotton yarn mill continued to operate. The startup rate of some factories declined, but most of them were still in normal production under the maintenance of orders.

Inventory of textile industry chain: slow down of grey cloth destocking

As of January 19, the raw material inventory of the spinning mill was 28.9 days, and the finished product inventory was 11.1 days. Raw materials and finished products continued to go to the warehouse slightly. The cotton yarn inventory of the weaving factory was 18.7 days, and the raw material inventory reached a historical high.

Trading situation of Textile City:

The turnover of Textile City (600790) dropped slightly, and the average level of chemical fiber cloth returned to the five-year average level, while that of cotton cloth was the same period.

The price of cotton cloth was mainly stable, with a small increase in some parts.

In terms of new orders, the growth rate has declined near the end of the year.

It is expected that the volume of all cotton grey fabric market will continue to decrease in the later period, and the weaving mill will enter the finishing stage.

Cotton yarn: textile profit slightly improved

Last week, the pure cotton yarn market was affected by the rise of raw materials, and the yarn price continued to strengthen, with the quotation increasing by 200-500 yuan/ton. From the perspective of trading volume, there was little change compared with last week, and the market did not have a large number of catch-up orders due to the rise in prices. The market gradually entered the closing stage near the Spring Festival. In terms of variety performance, rotor spinning is still the most common transaction. Due to the majority of orders in spring and summer, the supply of 40-60 cotton yarns continues to be tight.

In terms of profits, the mainland suffered a spot loss of 1503.6 yuan/ton, which narrowed but lasted more than half a year; However, Xinjiang's spinning profit is about 1000 yuan/ton, maintaining Xinjiang's yarn startup rate.

Yarn situation in Southeast Asia:

From the perspective of start-up, the start-up of Vietnam's cotton mills recovered slightly, the start-up performance of India from north to south was differentiated, and Pakistan's domestic performance slightly improved.

The price of imported yarn on the outer disk is stable and strong, the price center of Pakistan and India has moved up, and Vietnam is the most expensive. The pace of domestic orders slowed down.

Imported cotton yarn: destocking is expected to slow down in the later period, mainly due to orders in spring and summer

China will import 1.43 million tons of cotton in 2022/23, 310000 tons in November, 840000 tons in 2023/24, and nearly 50% of Brazilian cotton. From January to November 2023, the cumulative import of yarn will be 1.68 million tons; In 2022/23, the cumulative import of yarn will be 1.34 million tons, a decrease of 10.1% compared with 2021/22.

The spot price of imported cotton yarn continues to rise as the shortage continues, and the mentality of buying up rather than buying down stimulates the downstream to continue to replenish. However, recently, due to the impact of the arrival of overseas low price clearing yarn in Hong Kong, the speed of stock removal is relatively slow. Knitting yarn and rotor spinning in Vietnam have become the main pre-sale categories around the Spring Festival, and the sales profit has rapidly improved, but various ring spun coarse count yarns in India are weak.

Global: strong export of American cotton and Brazilian cotton

US Cotton Export Weekly: Significantly Increase Shipment to Record Annual High

According to the report of the United States Department of Agriculture (USDA), from January 5-11, 2024, the contracted export volume of American upland cotton in 2023/24 will be 95340 tons, 60% higher than the previous week, and 85% higher than the average level of the previous four weeks. The main buyer is China (51688 tons).

In 2023/24, the export shipment volume of American upland cotton reached 58498 tons, a new sales year high, 13% higher than the previous week, and 15% higher than the average level of the previous four weeks, mainly destined for China (33210 tons).

In 2024/25, the contracted export volume of American upland cotton was 3995 tons, and the main buyer was Guatemala.

Brazil - The planting speed is increased and the export pressure is high

As of January 13, Brazil's cotton planting in 2023/24 had completed 36.9%, an increase of 5.2 percentage points month on month, and a year-on-year increase of 0.7 percentage points.

According to statistics, Brazil's cotton export in December 2023 was 351000 tons, a month on month increase of 38.3% and a year on year increase of 99.3%. Its export volume was second only to that in December 2020; As of December, Brazilian cotton exports in this year totaled 1.193 million tons, up 22.8% year on year.

Recently, the Brazilian National Cotton Exporters Association said that Brazil may export nearly 2.5 million tons of cotton from July 2023 to June 2024, more than 1 million tons higher than that in 2022/23.

India - MSP gives strong support to Indian cotton price

CCI purchased 326400 tons of cotton at the minimum support price (MSP) set by the government in 2023-24 (October to September).

As of the week of January 14, 2024, India's cotton weekly market volume was 142500 tons, an increase of 13100 tons compared with the previous week; India's cumulative cotton market volume in 2023/24 is about 2.2954 million tons. (Statistics may include 22/23 cotton aging)