[Market Observation] Several Factors Affecting Cotton Market

 

Supply: At present, domestic cotton is in a pattern of oversupply. In 2022/23, Xinjiang's cotton output increased significantly, the growth rate exceeded market expectations. By March 27, 2023, Xinjiang's total lint processing volume had totaled 6.1322 million tons, a year-on-year increase of 15.6%, and the final Xinjiang cotton output may be between 6.2 million tons and 6.3 million tons. In 2023, the national cotton planting forecast for the new year will decline, which will boost the spot market in the short term, but will have limited impact. The pressure on domestic cotton supply in the short and medium term is still large. High commercial inventory and current downstream orders are mostly short orders, which makes the atmosphere of listing and inquiry for textile enterprises light. Most textile enterprises hold a cautious wait-and-see attitude.

International aspect: The global cotton supply and demand report in March showed that the global cotton demand in 2022/23 continued to decrease for 12 months, the global cotton output increased, and the ending inventory increased. In the middle of the month, the overseas banking crisis triggered turbulence in the global financial market, the ICE cotton market fell sharply, and Zheng cotton fell synchronously under the internal and external resonance. At the end of the month, the pessimism eased, the macro environment was stable, and the price of oil rose sharply. On the 28th, the ICE cotton futures rose by the limit, and the May contract closed at 82.52 cents.

Demand: In March, the overall order of cotton yarn enterprises was in a steady and small growth state, the factory maintained a high startup rate, the yarn went to the warehouse relatively smoothly, and the textile enterprises had a strong willingness to support the price. The pure cotton yarn market has not changed much. At present, from the perspective of various regions, Nantong has maintained orders for a long time, while the northern and Guangdong regions are poor, and textile enterprises have few new orders. Domestic sales orders in the weaving market are fairly good, among which the demand for hotel bed goods has increased significantly for home textiles, and textile enterprises are making up inventory at bargain prices. At present, the production of orders is maintained until the end of April and the beginning of May, and some orders can be arranged until June. However, the market is more cautious about goods delivery, and the factory order cycle is generally shortened. The export market was affected by the reduction of international consumption demand and the export of Xinjiang cotton was restricted. The demand was still weak, and the orders decreased significantly.

Future market forecast: In the short term, cotton prices may be boosted by the reduction of cotton planting intention in the new year, and market confidence has recovered. However, this year's loose supply situation has become a foregone conclusion. The loose supply and the less than expected recovery of consumption still put pressure on the price rise. In April, we paid attention to the demand fulfillment and the target price policy of cotton subsidies in the new year, and at the same time, we were cautious of macro risks. Without obvious positive factors, it is expected that cotton prices will continue to operate in shock.