1. Cotton Market: Are prices set to rebound?
Imported cotton quota is quickly drying up, providing a great opportunity for the domestic cotton price to rebound. Based on this expectation, the textile sector is keeping their cotton stocks at low levels, if evidence by the volume of the spot market before and after the weeklong May holiday.
In Hebei, one particular city has seen the cotton stock drop from 50,000 Mt to 20,000 Mt. after vigorous selling in April. According to the reporter, the smaller textile businesses have cleared their cotton stock, leaving the bulk of the tonnage concentrated in larger textile firms. As the cotton resource is concentrated to some large merchants gradually, the sales channels relatively reduced, which enables these large merchants to have the ability to bargain with mills. On the other hand, cotton stocks now centralized with larger firms gives them an ability to negotiate the price. Most players, however, are taking a wait and see attitude about price.
With no fresh quota news on the horizon, the gap between domestic cottons supply and demand is unlikely to change. According to CNCottons investigation, both Jiangsu and Anhui provinces are experiencing the same situation.
Basically, the domestic cotton price is stable, but there are some exceptions. Centralized stocks and a lower trade volume have not stopped the spot price from dropping. Shandong Demian sales have been okay, the price for FOB 3rd grade cotton (T328) is 13,900 RMB/Mt. Another report on May 3 out of Caozhou, Hebei province has 3rd grade cotton selling for 14,100 RMB/Mt. After deducting deliver and other taxes, the two prices are roughly the same.
In near term, however, the market has to digest the bearish factors.
2. Textile Market: Is the textile market under pressure?
Around the May Holidays, sales still continues to increasing in a small scope, but price is just so so, cotton yarn is suffering from the raw materials price, at the same time has to face the pressures from downs trams enterprises.
Around the May holidays, sales marginally increased while prices remained constant. Cotton yarn is under pressure from the raw materials price as well from downstream enterprises.
According to the investigations, so far, the higher grades combed yarn price is more stable, selling is good, sometime demands higher than supply. According, so far, SuNan area textile sector s combed yarn 40S price is 26,000 yaun ton and 31,000 yuan for the 50Sprofit is good. In compare, the other type of yarns profit is only 200-300 yuan and sometime is lower.
According to the investigation, higher grade combed yarn prices are stable with sales good and demand even higher than supply. The south Jiangsu combed yarn, 40S, price is 26,000 RMB/Mt and 31,000 RMB/Mt for the 50S. Profit for the latter is also good. For comparison, other types of yarn s profit are only 200-300 RMB and sometimes lower.
Take Zhejiangs QinQings market for example, on May 8th, the 32S yarn for the pure cotton knitting use was offered at 20,000 RMB.
50S pure polyester yarn, 16,400 RMB
30S rayon, 16,500 RMB
45S65/35T/C yarn, 18,400 RMB
40S/2 65/35T/R yarn, 9,500 RMB
Compared to last period only 32S yarn has increased (up 100 RMB) while other types of yarn have stayed the same offer price for the past last few weeks.
3. Market Forecast:
Traditionally, May is the hot season for the textile industries. Selling volume should continue to grow in the following months. Based on the continued reduction of inventories and the pressure to keep the capital flowing smoothly, the textile sector needs to have a big May. Still, its hard to see a yarn price increase happening since May is no longer a traditionally high margin month for cotton and the textile industries.
