Cotton Textile Market Enters Slack Season last Year

In the face of the difficult to find highlights of downstream demand for cotton, most ginning plants in Xinjiang actively use cotton futures for hedging operations. The price performance of seed cotton has been tepid since it was weighed this year, and there has been no panic buying in the market, creating a good external environment for the stable operation of ginning plants. However, the sales price of processed lint and by-products was lower than expected, which exposed the ginning plant to a greater risk of depreciation of raw materials and finished products.

The survey report of cotton textile enterprises in November of China Cotton Association shows that, according to the survey of more than 90 designated textile enterprises in China by the China Cotton Early Warning System, although the cotton yarn output of textile enterprises remained stable in November, the inventory of finished products and raw materials both increased.

As the temperature drops, the cotton textile market enters the off-season, new orders gradually decrease, and finished goods inventory has accumulated. In addition, a large number of new cotton came on the market, which increased the available resources in the market. At this time, the cotton price was weak and volatile, and many textile enterprises made up stocks on bargain, leading to a small increase in raw material inventory. For example, as of November 30, textile enterprises had 925000 tons of cotton industrial inventory in warehouse, an increase of 103000 tons month on month and 18000 tons year on year, of which 36% had increased cotton inventory.

The survey report of cotton textile enterprises by the China Cotton Association also showed that cotton textile enterprises' production remained stable in November and sales pressure increased. Among them, the yarn sales rate was 71%, down 4 percentage points from October. Textile enterprises' yarn inventory was 27.1 days, 3.9 days more than that in October; Gray cloth inventory was 31.7 days, 3.4 days more than that in October. In addition, the monthly average price of cotton yarn at home and abroad fell. Among them, the average price of 32 domestic pure cotton yarns in November was 21495 yuan/ton, down 222 yuan/ton month on month, down 1624 yuan/ton year on year.

From the analysis of the lint production cost of most ginning plants, since the listing of newly produced lint this year, the market lint spot price has been below the cost for most of the time. If ginning plants do not take effective business methods or use futures tools to avoid risks, they will inevitably face the loss of price decline. This is the main reason why the ginning factory actively hedges the futures market. It is understood that ginning plants in southern Xinjiang have low lint production costs, and most of the local ginning plants operate well, but the lint production costs in northern Xinjiang are high, and many local ginning plants are difficult to make profits.

In addition to the pressure faced by ginning plants, most of the oil and fat enterprises in Xinjiang that use cottonseed as raw materials are not operating very stably this year. At present, the price of cottonseed is relatively stable, and most oil enterprises have sufficient stocks, but the prices of cottonseed oil and cottonseed meal continue to weaken, and sales are not smooth.

On the whole, most ginning plants and related industrial enterprises in Xinjiang are still near the profit and loss line this year. In the face of the new economic situation, it is very important for cotton related industrial enterprises to study and judge the market development trend in advance and formulate risk prevention and control plans as soon as possible.