On April 22nd, the main contract of Zhengzhou cotton dropped all the way to 12,795 yuan per ton, a single-day slump of 110 yuan. However, ICE cotton futures rose against the trend, with the main contract closing at 67.26 cents per pound, an increase of 0.57%. Both futures and spot prices of cotton yarn have dropped, and the market is in a slump. What mysteries lie behind this round of market volatility?
Judging from the planting progress, Xinjiang cotton is making rapid progress. As of April 14th, the sowing progress across Xinjiang has reached 62.3%. Sowing in southern Xinjiang is coming to an end, and some early-sown cotton fields have already sprouted tender green buds. Northern Xinjiang and eastern Xinjiang have also entered the peak sowing period. However, the inventory and import data are not optimistic. At the end of March, although the inventories of China's cotton industry and commerce declined somewhat, the import volume dropped sharply. Only 70,000 tons were imported in March, a year-on-year plunge of 82.5%, a decline that was astonishing.
The downstream market is even more chilly. Textile enterprises are in a dilemma: the price of yarn is barely stable, but they have no choice but to reduce prices for promotion. Downstream demand has sharply weakened. Textile enterprises have few orders, face difficulties in shipping, and their profits have been continuously compressed. Some enterprises have even considered production cuts. The fabric enterprises are also on pins and needles. New orders are scarce, inventories are piling up like mountains, prices keep dropping, and the market competition is almost "white-hot".
In terms of foreign trade, the seemingly impressive March data hides hidden concerns. Although the export of textiles and garments increased by 12.9% year-on-year, this was mainly due to the efforts of foreign trade enterprises to "compete for exports" and the low base last year. As the shadow of tariffs looms over the market, the wait-and-see sentiment at the end of the traditional peak season is thick, and the downstream purchasing willingness has hit rock bottom.
In contrast, in the international market, American cotton has seen a turning point. Last week, the volume of US cotton swab contracts soared, coupled with the increase in international oil prices, ICE cotton futures rose for three consecutive days. If Asian importing countries turn to US cotton due to tariffs in the later period, the fundamentals of US cotton will improve significantly. Meanwhile, the weather disturbances in the United States and India have also added a touch of uncertainty to cotton prices.
Looking ahead, the domestic cotton market is in a "deadlock". Despite the traditional peak season, it is hard to witness the prosperity of the peak season. The uncertainty of the foreign trade environment is like a huge rock weighing on the market's mind. The lack of clear driving forces on both the supply and demand sides makes it difficult for cotton prices to escape the fate of low-level fluctuations in the short term. When will the textile market's "cold winter" finally welcome spring?
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