Market Observation: A Weekly Review Of Global Cotton Trends

Last week, cotton prices at home and abroad fell significantly. The Federal Reserve's future interest rate cutting policy tends to be cautious. The US dollar index has soared, and the prices of most commodities, including cotton, have declined. Recently, the domestic textile market demand has been weakening, the operating rate of enterprises has been further reduced, the willingness to purchase raw materials has been depressed, and the sales of ginning plants have slowed down. The approaching New Year's Day holiday and the uncertainty of the US trade policy have led to a strong wait-and-see atmosphere in the market and a marked increase in risk aversion. It is expected that domestic cotton prices will continue to be under pressure.

1、 Last week's price review

Last week, the average settlement price of the main contract of Zheng Mian Futures was 13456 yuan/ton, down 2.2% from the previous week; The average price of national cotton price B index, which represents the market price of standard lint in the mainland, is 14751 yuan/ton, down 2.2% from the previous week. The average settlement price of the main contract of cotton futures in New York was 68.36 cents/pound, down 2.0% from the previous week; The international cotton index (M), which represents the average CIF price of imported cotton at China's main port, is 77.92 cents/pound, which is converted into RMB 13603 yuan/ton of import cost (calculated at 1% tariff, excluding port sundries and freight), down 1.5% from the previous week. The domestic cotton price is 1148 yuan/ton higher than the international cotton price, and the difference between domestic and foreign cotton prices is 116 yuan/ton smaller than last week.

Cotton yarn prices fell slightly, significantly lower than cotton prices. This week, the average price of domestic C32S combed pure cotton yarn was 21187 yuan/ton, down 0.1% from the previous week. The price difference between yarn and cotton has expanded to 6526 yuan/ton. The average price of conventional outer yarn was 22163 yuan/ton, unchanged from the previous week. The price of polyester staple fiber was 7017 yuan/ton, up 0.7% from the previous week.

2、 Recent market situation outlook

（1） International market

The external environment pressure, cotton prices low consolidation. On December 18, the Federal Reserve cut the policy interest rate by 25 basis points to 4.25% - 4.50%. Chairman Powell made it clear that the path of interest rate reduction next year would be more cautious. The dollar index rose to the highest level since November 2022, the stock and commodity markets fell generally, and cotton prices fell under pressure from the external environment. In the cotton market, the supply is relatively strong, which puts pressure on cotton prices.

According to the data of the US Department of Agriculture, the contracted volume of US cotton exports in the week of December 12 was 44300 tons, fluctuating around 40000 tons for three consecutive weeks, an increase of 8000 tons over the previous week; Due to the downturn in market consumption, the cumulative contracted volume was 761000 tons, a year-on-year decrease of 1479400 tons.

The domestic demand for cotton in India is weak, and the price of seed cotton continues to fall and is lower than the minimum protection price. As of mid December, Indian cotton companies have purchased 527000 tons of cotton, more than one third of the number of new cotton that has been listed, but the supporting effect on cotton prices is not obvious.

According to the Australian Cotton Merchants Association, the main cotton producing areas in Australia have experienced frequent rainfall recently, and the farm has sufficient water storage. It is estimated that the new cotton output will reach about 1.1 million tons, the third highest in history.

In the short term, the consumer side has not improved, and the supply side pressure continues to rise. International cotton prices showed signs of stabilizing after falling for two consecutive weeks. Considering the increasing external pressure, international cotton prices are expected to consolidate at a low level.

（2） Domestic market

Market confidence suffered, and cotton prices continued to bear pressure. The spokesman of the National Bureau of Statistics said on December 16 that at present, the external environment is more complex, domestic demand is insufficient, and some enterprises have difficulties in production and operation. The foundation for a sustained economic recovery remains to be consolidated. In the cotton market, with the continuous decline of Zheng cotton prices, the loss of cotton processing enterprises has increased, and the market confidence has suffered.

Some ginning mills in Xinjiang have reported that the lint sales have been weak recently, and the market's expectation of replenishment before the festival has been disappointed. In the textile market, due to the continuous downturn in the downstream market, the loss of textile enterprises has expanded, and some enterprises have avoided market risks by reducing production capacity. According to the data of the National Cotton Market Monitoring System, in early December 2024, the start-up rate of the sampled enterprises was 76%, a decrease of 5.4 percentage points month on month and 5.0 percentage points year on year.

Domestic clothing terminal retail sales rebounded briefly in October and then fell again. According to the data from the National Bureau of Statistics, clothing, shoes, hats, needles and textiles fell 4.5% year on year in November. In the short term, the decline in cotton prices has significantly dampened market confidence. Considering that Trump will take office as President of the United States in January, the wait-and-see atmosphere in the market has significantly warmed up before. As the New Year's Day holiday approaches, some enterprises plan to have a holiday around the New Year's Day, and domestic cotton prices are expected to continue to be under pressure.