Cotton Prices Fall, Quotas Reduce: Textile Enterprises Accept "Market" Baptism

From December to the end of 2014, the cotton market gradually entered the stage of stabilization, and the textile enterprises still failed to get out of the shadow of the fall in cotton prices. The acquisition process was slow, the willingness to replenish the Treasury was not strong, and the overall operation performance was poor. However, the industry said that the implementation of the new price policy in China's cotton market based on market supply and demand has been effective. Whether cotton seed farmers sell seed cotton, processing plants buy seed cotton, or textile enterprises purchase lint, more or only consideration is the market demand. In the process of forming the price mechanism, whether it is cotton enterprises, spinning enterprises or cotton farmers, all need to undergo a painful process.

Replenishment of textile enterprises is imminent.

At present, our country Cotton price In line with the international market gradually, the purchase price of seed cotton in Xinjiang has dropped from 8 yuan to 9 yuan per kilogram in 2013 to the current range of 5 yuan to 6 yuan / kg. The price of seed cotton in the mainland cotton area has also dropped significantly. The seed cotton price in Hubei province was around 8 yuan / kg last year, and this year only 5.6 yuan to 6 yuan / kg.

The sharp fall in cotton prices not only made cotton farmers and Cotton Traders pessimistic about the market, but also kept the textile enterprises in a constant wait and see. In the October business survey, most cotton textile enterprises had the desire to increase their inventories, but then in the middle of November, US cotton futures began to fall, and domestic cotton prices went down. Enterprises began to reduce inventories to cope with the risk of falling cotton prices.

Although the cotton market is currently watching, the downstream demand is not good, but near the end of the year, the cotton textile enterprises have a new demand for rotation. Insiders said that the current attitude of textile enterprises is "to observe some time, if cotton prices continue to be stable, will start procurement", the spot market is expected to stabilize.

Reporters found that in recent years, parts of textile enterprises in Ji Lu and Jiangsu and Zhejiang provinces are in urgent need of raw materials. The spinning mills which mainly use cotton, cotton and West African cotton as the main cotton assorting, are generally exposed to the bottom of foreign cotton stocks and are faced with the need to continue replenishment or adjust the situation of cotton blending. Enterprises that mainly cotton with long staple cotton and high quality Xinjiang cotton are also facing the demand for replenishment. A small number of enterprises need some high quality real estate cotton, and the textile enterprises' willingness to replenishment will increase.

A person in charge of an enterprise in Shijiazhuang, Hebei said that the raw materials of their enterprises were Xinjiang cotton and imported cotton. The inventory was only maintained for about 15 days in the near future, down 46% from 28 days in mid November. "Procurement is imminent, otherwise we will have to stop production." The official expressed his concern. It is understood that the recent the Yellow River River textile enterprises are mostly facing this situation.

Increased proportion of Xinjiang cotton use

Besides implementing cotton In addition to the direct subsidy policy for target prices, the NDRC also announced that it would no longer issue additional quotas for cotton next year in addition to issuing 894 thousand tonnes of tariff quotas. The news came, causing a complaint of domestic high yarn enterprises. Anhui Huamao Group material department, Changjiang Ming Hua said, for the production of high-grade cotton enterprises, the late cotton pressure is very large, the domestic cotton quality is poor, can not meet the production needs of enterprises, and the quota of imported cotton is also very limited.

The head of a textile enterprise in Shandong said that although the quota of cotton imports was tight this year, the enterprises did not rush to buy Xinjiang cotton because it is still not clear enough to see the market. Although Xinjiang cotton has been temporarily stable in recent years, there may still be a downward trend.

Many enterprises have already formulated procurement plans, but some enterprises are willing to wait and see. The first is that cotton prices are still not at the bottom. As of December 12th, the 3128 grade of Xinjiang cotton which had moved to Shandong and Hebei was priced at 14500 yuan / ton to 14600 yuan / ton, and the 2129 grade was 15000 yuan / ton to 15100 yuan / ton, which was basically in line with the price of S-6 grade India cotton 14500 yuan / ton to 14700 yuan / ton in Qingdao port. However, the slow sale and declining trend of India cotton made the textile enterprises worry about the continued decline of Xinjiang cotton. The two is the shortage of high-grade cotton resources. "We sent two business personnel to Xinjiang, one to the north of Henan, and one to the south of Xinjiang," said a person in charge of a business in Zhengzhou, Henan. He said that since next year's import quota may be only 894 thousand tons, their enterprises were forced to adjust cotton blending and increase the proportion of Xinjiang cotton to 70%, so they were more concerned about the quality and price of Xinjiang cotton.

The head of a cotton textile enterprise in Jiangsu said that at present, cotton and Xinjiang cotton accounted for more than 90% of the enterprises. Since they knew that the quota of imported cotton was no longer increasing this year, the enterprises actively adjusted cotton blending and sought for Xinjiang cotton which was of high quality and suitable for production needs.

Depreciation of products and losses of enterprises

If cotton prices fall and quotas are reduced, cotton textile enterprises will be troubled by cotton products, then the depreciation of finished goods inventory of cotton textile enterprises is the most troublesome problem for enterprises. The director of material Department of Jiangsu Shan Shan group said that the price of cotton fell and businesses were very miserable. He said that even if a ton of cotton fell by tens of dollars, then the price of the back cotton yarn will also be reflected immediately, and the cotton inventory and finished inventory will be depleted. So at this stage, enterprises try to reduce inventory. Analysts said that at present, the textile enterprises use cotton to buy with them, large enterprises generally will be ready for 50~60 days, and small and medium-sized enterprises are basically in 25~30 days, or even for only a week or so.

The fall in domestic cotton prices has also greatly reduced the export profits of China's yarn. According to Chinese customs statistics, in 2014 1~10, the number of yarn exports in China increased to 3 million 346 thousand tons, an increase of 11%; the export amount was 10 billion 210 million US dollars, up 1.1%; the average export price was 3.05 US dollars / kg, down 8.9% compared to the same period last year. Most yarn The head of the enterprise said that the decline in yarn export prices directly affected the business profits of the enterprises. The head of a yarn export company in Shandong said that the price of yarns was not high last year, and that the price of yarn would increase this year. In addition, cotton prices fell very fast this year. In order to reduce losses, enterprises have to increase the quality of yarn products and attract businesses to order products through many ways.

The industry believes that this is the stage that China's cotton policy reform has to go through. It is also a baptism that cotton textile enterprises must accept in the market reform of cotton. Liu kman, director of China cotton storage information center, said that the implementation of cotton direct price subsidy policy this year, the most obvious result is that the mechanism of cotton price formation by the market has basically taken shape. Whether cotton farmers sell seed cotton, processing plants buy seed cotton, or textile enterprises purchase lint, the most or only factor they consider is market demand. This is the purpose of the implementation of the new cotton policy and the result that the policy should achieve.