Last week (August 24-28), as the end of the cotton year approached, the pressure on cotton inventory eased, consumption gradually recovered, and hedging was sold to close positions. Zheng cotton continued to rise slightly. China-U.S. economic and trade dialogue has resumed, and China continues to purchase U.S. cotton, supporting the rise in U.S. cotton prices. Since the recovery of cotton yarn production capacity is faster than that of terminal consumption, the supply is relatively surplus. In addition, after the appreciation of the RMB, it is faced with the impact of low-priced imported yarn. Price competition is fierce and continues to fall, and conventional varieties maintain deep losses. Cotton substitutes polyester are priced at 5,422 yuan/ton and viscose at 8,550 yuan/ton, which are relatively stable. The price difference remains high and consumption is downgraded, and the substitution of cotton continues to increase. The cotton CNCottonB index is 12564 yuan/ton, a weekly increase of 207 yuan/ton. Compared with Zheng Cotton CF2009, the price premium is 204 yuan/ton, an increase of 127 yuan/ton.
Futures. As spot sales and short positions continued to be closed, Zheng cotton prices rose slowly. The front-month contract CF2009 closed at 12,360 yuan/ton last Friday (August 28), a weekly increase of 80 yuan/ton. September was approaching delivery, and funds were quickly transferred to January. Both transactions and positions decreased significantly, with 111,669 transactions, a decrease of 51.7%, and positions decreased by 40.4%. The main contract CF2101 closed at 13,030 yuan/ton last Friday, a weekly increase of 100 yuan/ton, with fewer transactions and a slight increase in positions. The top 20 positions held 263,608 long orders, a decrease of 5,169. There were 381,189 short orders, a weekly increase of 4,888 hands, and a slight increase in headroom of 117,581 hands, a weekly increase of 10,057 hands. There were 14,664 registered warehouse receipts, a weekly decrease of 648. There are 188 forecasts, a weekly decrease of 90, and the available resources are reduced. Global epidemic prevention and control has become normalized, and the US’s suppression of China has been escalating, worsening the international trade environment and undermining international trade rules. The global trade order and China’s economic recovery are facing more challenges, and the market has reached the level of the same period last year before the epidemic. New cotton is about to go on the market in September, which will put pressure on the market. The upward pressure will be greater. The acquisition of new cotton and the trend of Zheng cotton will affect each other.
External market: Sino-US trade representatives had a phone call, China continued to purchase, US cotton rose slightly, ICE’s main December contract closed at 65.08 cents/pound, a weekly increase of 82 points. The market has exceeded the pre-epidemic level of 60 cents/lb in the same period last year, reaching the high of 65 cents/lb in October-November last year, and it is under pressure to continue to rise. The global trade environment has deteriorated, the epidemic situation in some overseas areas is still severe, textile and clothing consumption has been downgraded, and the proportion of cotton used has dropped. Before the epidemic and Sino-US relations improve, cotton consumption will remain low for a long time, and cotton prices are more likely to fluctuate in the low range.
Spot aspect. Futures rose slowly throughout the week, with lows higher than market expectations and higher than the point price concentration area. There were relatively few transactions, with only a small amount of market price and fixed price resources being traded. The transaction price of Xinjiang cotton in the mainland warehouse is concentrated at 12,250-12,300 yuan/ton for the CF2009 contract. The transactions of low-basis resources gradually decreased and traders generally raised the basis. The overall basis level increased, and the basis of machine-picked cotton was concentrated at 400-400. 600 yuan/ton, and the basis difference of hand-picked cotton is concentrated at 800-1,000 yuan/ton. Among imported cotton, Brazilian cotton has a better price-performance ratio than Xinjiang cotton of the same quality, and transactions are active; low-priced Indian and West African cotton also have a small amount of transactions; high-priced Australian cotton and US cotton have few transactions, but the price difference with Xinjiang cotton has narrowed, and some US cotton Cotton resources are close to Xinjiang cotton, which is expected to boost sales. Spinners still adopt the purchasing strategy of buying as they are used and bargaining at low prices.
Operation suggestions. The epidemic is not over yet, and the impact on cotton consumption has not been eliminated. However, the domestic and foreign market prices have returned to the same period last year, and the US market is already about 5 cents/pound higher than the same period last year. Sino-US relations are unlikely to improve in the short term, and there will still be upgrades. possible. New cotton will soon be on the market, supply will increase, and hedging short orders will increase, which is negative for the market. Consumption is still unstable. In August, cotton cloth sales fell by 35.7% month-on-month and 40% year-on-year. Cotton yarn is still in deep losses. Cotton prices continue to rise without motivation. Pay attention to the risk of a correction. Spinners need to grasp the rhythm and control reasonable inventory and purchase at low prices in stages.
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