Market Analysis: Pay Attention To The Future Trends Of Global Cotton Under Strong Supply And Weak Demand

Due to the lack of favorable support at the macro and industrial levels, the international cotton price is running in a weak and volatile range. Although the US cotton price showed an upward trend at the beginning of the month, the USDA supply and demand forecast in December significantly reduced the global consumption, indicating that the market has not entered a real recovery. At the same time, the commodity market is under pressure, and the ICE cotton fell again from 83 cents to 79 cents, a greater decline than the domestic price. Before and after Christmas, the contracted shipment of American cotton exports performed well, the consumption of foreign terminal markets improved slightly, and the market stopped falling. However, since the middle of November, the number of cotton listed in the major producing countries in the northern hemisphere has gradually increased, the market supply pressure has increased, and the resistance to market rise is large. As of the 27th, the settlement price of the main contract of ICE cotton futures was 80.53 cents, up 1.11 cents from the beginning of the month.

In the December global cotton supply and demand report released by the U.S. Department of Agriculture, the global consumption is expected to be 24.761 million tons, with a month on month decrease of 343000 tons. For details, this time, China's consumption is expected to be significantly reduced by 218000 tons to 7.947 million tons. The global cotton ending inventory was 17.94 million tons, an increase of 196000 tons month on month, and China's ending inventory was 328000 tons month on month. The global consumption decreased month on month, and the global ending inventory increased month on month, which was reported to be bad for the cotton market.

Since the beginning of December, the margin of textile demand has improved, the enterprise has made periodic replenishment, and the cotton yarn has continued to be destocked. There is great resistance to price rise, and there is no new upward drive in the short term. The startup rate of enterprises has improved, but the cotton yarn market is generally light and the sales progress is slow. The market of pure cotton grey cloth continues to go, and the weaving mills have few large orders and thin profits. The domestic spinning and weaving links showed a seasonal improvement, and the raw cotton was just purchased, but the finished product inventory pressure was still large, and the enterprises still lacked confidence in the future market.

Domestic textile and clothing consumption has improved, but the profits of enterprises are insufficient. According to the data of the National Bureau of Statistics, the added value of the textile industry in November increased by 2.1% year on year; The total retail sales of clothing, shoes and hats, and knitwear and textiles reached 150.3 billion yuan, up 22% year on year. From January to November, the total retail sales reached 1259.5 billion yuan, up 11.5% year on year. From January to November, the profit of national textile and clothing enterprises above designated size declined: the total profit of the textile industry was 65.47 billion yuan, down 1.8% year on year; The total profit of the textile and clothing industry was 52.79 billion yuan, down 4.8% year on year.

Future forecast: In general, domestic macro policies emphasize stability and sustainability, and the overall warm atmosphere is expected to continue. However, there are many uncertainties in the international market, and the recovery of global consumption remains to be seen. Although the textile market in December was supported by the increase of seasonal orders and the demand of textile enterprises for replenishment, the cotton market is at the peak of new cotton listing, the pattern of cotton supply exceeding demand cannot be broken in the short term, the pressure of high cotton yarn inventory in the downstream has not been fully absorbed, and cotton prices are still lack of upward drive.

Near the end of the year, if the textile enterprises continue to lose profits in processing, the number of small and medium-sized yarn mills to reduce production and plan holidays in advance will increase. It is estimated that if the demand side is not significantly favorable at the beginning of 2024, the cotton price will remain under pressure and maintain a volatile trend. Later, with the gradual consumption of inventory, the planting area is expected to decrease next year, and other supply side benefits will support the rising cotton price.