Cotton yarn market outlook is expected to improve

The Spring Festival is approaching. Textile people who have worked hard for a year began to make year-end summaries. Everyone generally reported that 2019 was really difficult. The profits of large enterprises with a long industrial chain could still be equal to last year, while small and medium-sized enterprises generally suffered losses. After the summary, the company is also preparing for a holiday. According to our research, weaving enterprises generally suspend production from the tenth to the twentieth day of the twelfth lunar month, and the cotton spinning enterprises suspend production from the 20th to the 29th day of the twelfth lunar month. Before the Spring Festival, cotton yarn inventory is mostly 20-30 days, and cotton inventory is 30-60 days. For the cotton yarn market after the Spring Festival, market participants are generally bullish. The reasons are as follows: 　　 Since June 2018, domestic and foreign cotton prices have experienced a 'bear market' for one and a half years. Among them, the Zheng Cotton Index fell by 37.8% and the U.S. Cotton Index fell by 37.8%. The drop was 40%. After the sharp drop, there must be a big rise. Since October 2019, with the improvement of Sino-US trade relations, cotton prices have oversold and rebounded. Among them, Zheng Cotton has increased by 16.13%. The start of the US cotton rebound is 20 days earlier than Zheng Cotton. The increase expanded to 20.8%. The focus of cotton operation has shifted upward. Under the influence of the psychology of “buy the rise but not the fall”, market confidence has improved significantly. In December 2019, downstream cotton spinning enterprises even took the initiative to replenish the inventory, boosting Zheng Cotton's current resonant rise, 3128 lint cotton Spot gains reached 10.84%.　　 In the case of downstream wait-and-see and sluggish demand, the cotton yarn market started slowly. In late December 2019, cotton yarn prices officially entered the rising channel. During the period, there were three rounds of rises, one round each in late December, around New Year's Day, and early January 2019. Although the order quantity before the Spring Festival can be insufficient, due to the continuous increase in raw material prices, the market outlook for cotton spinning enterprises continues to rise, and the sales atmosphere is heating up. Some companies do not accept large orders before the Spring Festival, but only accept small orders; some companies accelerate the accumulation of cotton yarn inventory and stop production the night before the Spring Festival 1-3 days, after the festival, according to the inventory situation, construction will start 1-7 days late. However, product sales generally resumed work earlier, mostly from the sixth to the eighth day of the first month.　　 Since the improvement of Sino-US trade relations in October 2019, with the increase in raw material prices, especially since December 2019, the price of raw materials has accelerated, the cotton spinning industry chain is expected to improve, the speed of cotton yarn destocking has accelerated, and the profits of cotton spinning enterprises have been restored. Coupled with the approach of the Spring Festival, cotton spinning enterprises are actively stocking up. As of January 19, the available days of cotton inventory of cotton spinning enterprises in Shandong area were 45 days. Some large enterprises had even higher inventories of 60-90 days, while the inventory of some small and medium-sized enterprises was low, less than 30 days. At the same time, the local cotton spinning enterprises have a 25-day cotton yarn inventory, and they are actively storing for winter before the holiday. It is expected that from the sixth to the eighth day of the first lunar month, cotton spinning enterprises will resume production one after another. However, logistics and transportation mostly return to normal after the Lantern Festival. Based on this calculation, the cotton yarn of Shandong cotton spinning enterprises will continue to accumulate in the warehouse, which may exceed 30 days.　　 In addition, factors such as rising import yarn prices and the central bank’s RRR cut have helped the cotton spinning market improve to a certain extent. On January 16, China and the United States signed the first phase of the trade agreement. With the implementation of the agreement, downstream orders are no longer on the sidelines, orders are expected to 'blow out' after the Spring Festival, and the cotton yarn market will also usher in a 'small spring'.　　 Although cotton prices continue to rise, the problem of lowering prices downstream is prominent, and some weaving companies intend to switch to chemical fiber products. For example, before the Spring Festival, a pure cotton fabric manufacturer received 70% of foreign trade orders, and the order was maintained until March, but the foreign merchants kept the price down. In order to save costs, the company intends to switch to rayon. In addition, the signing of the first phase of the Sino-US agreement means the alleviation of short-term trade frictions, but it is by no means an end. Therefore, although the cotton yarn market is expected to improve after the Spring Festival, it is also necessary to be cautious. For textile people, they must practice their internal skills and use hedging tools such as futures and options to deal with trade frictions that may reappear in the later period. Article Keywords: 　Cotton Yarn Market Outlook