The 2016/17 cotton season has passed halfway. The demand for cotton replenishment in the peak season of cotton spinning production in the first half of the year will make the domestic cotton market prosperous in both purchases and sales. Now, as the textile market is about to enter the second half of the year, the peak season is fleeting, and the number of orders has increased. The reduction also means that a new round of “bloodletting” competition in the market is undercurrent.
Recently, the latest market data showed that from January to April 2017, the average yarn inventory level of textile enterprises was 16.29 days, which has remained relatively stable for three consecutive years, which is significantly lower than the average inventory level of more than 20 days in 2011-2014; and In contrast to the low level of yarn, the average inventory of gray fabrics from January to April 2017 was 27.49 days, with a rapid recovery momentum and already at the highest level since 2008.
The author believes that there are four major reasons for the “divergence” between upstream and downstream.
Shortened yarn-end product inventory turnover cycle
For cotton’s direct downstream yarn manufacturers, since the purchase price of cotton at the raw material end accounts for 70% of the cotton yarn production cost, formulating a cotton purchase plan and maintaining a relatively reasonable raw material inventory will have a competitive advantage for the company’s products. Very important. my country’s main yarn-producing provinces are mostly located in the mainland. Although Xinjiang’s cotton spinning production capacity has expanded rapidly in recent years, cotton consumption is still dominated by the mainland’s Shandong, Henan, Jiangsu, Fujian and other provinces.
According to feedback from textile enterprises, yarn demanders generally have a tendency to shorten the ordering cycle, because the yarn produced by textile enterprises is generally only suitable for designated orders, and production to order has become an industry practice, unlike raw cotton, which can be hoarded. Inventory, so we can also find from the inventory days of yarn that textile companies have shortened the product inventory turnover cycle accordingly.
Demand for imported yarn slows down and export of cotton yarn increases
Although my country implements a quota management system for the import of cotton, there are no import and export quota restrictions on cotton yarn. This also makes the price difference between domestic and foreign cotton widen and the price of imported cotton yarn becomes competitive. Correspondingly, it will lead to The phenomenon of imported yarn impacting the domestic market.
From the comparison of domestic and foreign cotton yarn price trends, taking 32-count cotton yarn as an example, the price of domestic yarn has been continuously lower than the price of imported yarn since the beginning of 2016, which is reflected in my country’s cotton yarn import data for the entire year from January to December 2016. Judging from the above, the cumulative import volume has dropped by 15.9%. In addition, my country’s cumulative exports of cotton yarn have increased by 4%. Since the beginning of 2017, my country’s cotton yarn imports have increased year-on-year in January and February, resulting in yarn inventories at ports also showing a year-on-year increase. Judging from the comparison of domestic and foreign cotton prices, the price difference with the 1% tariff cotton import cost has narrowed to more than 1,000 yuan/ton, and the demand for imported yarn has slowed down.
The peak season for yarn, but the terminal has not fully recovered
March to May after the new year is usually the peak season for downstream cotton spinning production. The resumption of work by textile companies after the new year this year has also been advanced. Judging from downstream feedback, the order receiving situation this year has been very good, and even the production period cannot be scheduled, and they have to ask for help. The demand side negotiates to postpone the delivery date. Based on the good momentum of cotton spinning orders after the year, cotton yarn quotations generally increase. The China Cotton Industry Association conducted a survey on the production and sales of major cotton spinning regions in March. From a regional perspective, the market in Shandong is performing well and there are sufficient orders. The production plans of some companies have been scheduled to June, and product inventories are at About 10-20 days, it is in a low state, and the overall operating condition is better than the same period in 2016;
The peak period of my country’s cotton yarn production can be expected to last at least until the end of May from the current information. Analyzing the downstream and terminal performance of cotton yarn along the cotton spinning industry chain, the inventory turnover of gray fabrics has not improved. In addition, my country’s textiles, clothing and The export sales performance of clothing accessories is still far from optimistic. In addition to the poor export performance, domestic sales of domestic clothing products also showed a year-on-year decline in the first two months of 2017. Judging from this, end products have not yet achieved a comprehensive recovery, and the sluggish backend market will eventually constrain the continuation of the upstream peak season.
Although the cotton spinning situation is grim, it is getting better!
On the one hand, the yarn market is picking up, and on the other hand, gray fabric inventories are rising rapidly. The analysis pointed out that the overall market sales and inventory are running in opposite directions, indicating that the purchasing power of the terminal market is relatively weak, the market is still in a situation of oversupply, and the trend of stagflation is obvious.
However, on a monthly basis, gray cloth inventory levels have climbed from about 20 days in early 2016 to nearly 30 days in January 2017, and then fell back month by month to about 25 days in April, showing a trend of inventory decline.
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