US Cotton Exports Are Less Than Expected 60%. Is Sino US Trade Friction Enough To Stabilize Cotton Market?

In June 29th, the news of the successful meeting between the leaders of China and the United States in Osaka, Japan, swept through the circle of friends. The two sides agreed to resume economic and trade consultations on the basis of equality and mutual respect. The US side said it would no longer impose new tariffs on Chinese exports. The two countries' economic and trade teams will discuss the specific issues. If the two sides can reach an agreement, all tariffs added may be cancelled.

At present, the continued deterioration of trade between the two countries is temporarily suspended, but uncertainty still exists. For China's cotton textile industry, uncertainty still has a great impact on the market, especially the cotton market.

At present, although the vast majority of our textiles and clothing can still be exported to the United States, there are many uncertainties. At the same time, our country continues to impose a 25% import tariff on US cotton, and Chinese enterprises will be cautious in signing the contract. President of the National Cotton Association, GaryAdams He said: "By the adverse effects of Sino US trade friction, the US exports cotton to China only 60% of what we expected." Obviously, Sino US trade friction has made the US cotton face export pressure, and once affected the export orders of Chinese textile enterprises. Both countries have taken active measures to avoid trade risks, and domestic textile enterprises are looking forward to the return of market confidence.

US cotton exports are not as good as expected.

Turning to sustainable development

A 25% tariff on the US cotton increased the volume of cotton exports to China, which was only 60% expected by the international cotton association of the United States. 。 When the US cotton briefly "absent" in China's market, cotton from Brazil and Australia entered the Chinese market in the first place, and India's cotton exports to China continued to grow.

In order to restore the US cotton exports to China as soon as possible, The international cotton association of the United States issued the code of trust for sustainable development of cotton in the United States, showing its willingness to promote sustainable development and traceability of cotton production, and to maintain the huge market in China by improving the quality of products through new textile technologies. "From the perspective of cotton procurement, we should pursue sustainable development in Asia as a whole in China." "We are actually helping Chinese companies improve their competitiveness and provide their products and brands to the world," said Mao Kailin, director of China and Northeast Asia, the international cotton association.

In fact, the impact of trade friction is not only on the volume of cotton trade between the two countries, but also the volatility of prices. In the past 10~12 months, the price of cotton in the United States has also declined. As of June 19, 2019, cotton futures in the New York futures exchange fell by nearly 25% in 12 months. 。 Although the US government subsidized 6 bales of cotton per packet, it was a drop in the bucket compared with the decline in prices.

"As the cotton trade association of the United States, we really hope to continue urging the two governments to further dialogue on trade frictions, to end trade frictions as soon as possible, and to restore the cotton trade between the two countries to a normal level as soon as possible." GaryAdams said. He said that in the summer of last year, cotton prices in the New York futures market were the highest, and the global demand for cotton was also very optimistic. However, after the United States adopted new trade measures, the market was not very optimistic, but also had a combined effect, and the entire supply chain was also affected. An important part of this is the export of cotton to China. According to data from the international cotton association of America, exports of cotton in the United States are much larger than domestic consumption, and the export volume is 3~4 times that of consumption.

According to the US Department of agriculture, In 2019, the sown area of US cotton was 13 million 720 thousand acres, a decrease of 2.7% over the same period last year. Some experts said that although the sowing area was lower than expected, the US cotton supply for export is expected to reach its highest level since 2007. Therefore, as the world's largest cotton supplier, the decline in China's exports has forced the United States to turn to other markets for replenish. Among them, the fastest growth rate of imports of US cotton is Vietnam.

As of May 23, 2019, Vietnam imported 2 million 717 thousand tons of cotton in the United States, ranking the first among all the countries importing American cotton, and China imported 1 million 326 thousand packs of second. In addition, Bangladesh's imports of US cotton also showed a rapid upward trend. Interestingly, Vietnam's 70% cotton yarn companies are Chinese companies, which means that even if the US cotton exports to Vietnam, it is still used by Chinese textile enterprises.

In the face of the decline in the number of Chinese and American cotton imports, the United States International Cotton Association, in addition to seeking other countries to supplement, also hopes to make an article on sustainable development and cotton traceability, cooperate with more advanced cotton spinning technology, improve the position of American cotton in the hearts of Chinese customers, and guarantee its competitive advantage with other countries' cotton varieties.

Domestic textile enterprises orders affected

Accelerating transformation is the fundamental solution.

Looking at the main pressure faced by cotton spinning enterprises in China at present, it is not the quality of raw materials, but also the pressure of operation.

According to the data provided by relevant agencies, Judging from the price trend of domestic cotton and cotton yarns, the situation has stabilized steadily before mid April, but then there was a sharp cliff fall. 。 The key event was that the United States decided to impose tariffs on 200 billion dollars worth of Chinese goods, including cotton and cotton yarn.

However, In the Sino US trade, the share of intermediate goods such as cotton yarn is not large, but President Trump in June threatened an additional tariff of $325 billion, including clothing. Although the subsequent Trump statement did not decide to levy taxes on this part of the product, many orders were affected under the condition of unknown signals, and the market environment suddenly changed. Many textile enterprises in China were caught unprepared. Many leading enterprises in China also accelerated the pace of the whole layout of production capacity to avoid trade risks.

"Qingming Festival, the domestic market environment is good, plus we will carry out a replenishment, so the price of cotton yarn is good." A textile enterprise official said, "but after the United States announced tariffs, the domestic cotton yarn prices fell very fast." At present, all cotton textile clusters are actively seeking transformation and upgrading to enhance their competitiveness, or to open up new overseas markets. 。

Of course, besides the complicated and changeable external environment, the textile industry is also facing the problem of overcapacity.

Data show that May 2019 cotton business inventories of 3 million 528 thousand and 100 tons, a year-on-year high 。 The inventory of cotton industry continued to decrease, reflecting the weak mentality of the downstream textile enterprises to the cotton market. 。

By estimation, It is estimated that domestic cotton business inventories will exceed 2 million 500 thousand tons at the end of 2018/19 (end of 2019.8), a record high. 。 The acquisition of corporate funds at the end of the year 2018/19 is bound to affect the acquisition of cotton in 2019/20, or lead to a downward pressure on cotton purchasing prices in the new year.

The current market supply of cotton is imported cotton, reserve cotton and social stock. 。 From 2018/19 to now (2018.9~2019.5), cotton has a total import volume of about 1 million 590 thousand tons, with an average monthly import volume of about 180 thousand tons. In 2019, the relevant departments planned to turn out 1 million tons of cotton reserves, and the total output in the 5-6 months was about 350 thousand tons, the remaining amount was about 650 thousand tons, and the average monthly turnover was about 220 thousand tons. 6, 7, 8, three months, domestic cotton consumption is about 700 thousand tons per month. It is estimated that domestic cotton business inventory will exceed 2 million 500 thousand tons by the end of August 2019.

As everyone knows, China is the world's largest cotton textile production industry, the industry is labor-intensive industries, human costs in the total cost accounted for a huge proportion, and after the demographic dividend gradually disappeared, many domestic textile enterprises seek transformation. 。 The direction of cross-border transformation is Southeast Asia, and the direction of domestic transformation is to transfer capacity from other provinces to Xinjiang. At present, 70% of Vietnamese cotton yarn enterprises come from China, which shows the attractiveness of Southeast Asia's manpower cost advantages to China's textile enterprises, while the industrial transfer to Xinjiang comes from the attraction of policy advantages.

At present, there are some spinning factories in Xinjiang. Wei Qiao textile (6 million spindles / years). Tianhong textile (4 million spindles / years) and Ruyi textile (2 million spindles / years) and other leading enterprises, the cotton spinning industry in Xinjiang has risen rapidly, becoming the fastest expansion area of China's capacity in recent years.

"In the first two years, the Xinjiang Autonomous Region government took the initiative to guide the spinning mills to build factories in the past, attracting many enterprises." Industry analysts told reporters, "whether in the construction, transportation or human resources, there are subsidies." However, the rapid expansion of new capacity has made the pressure on domestic overcapacity to become even more severe. The Xinjiang Autonomous Region government has strictly controlled the disorderly development of cotton spinning industry in 2018. The pressure of overcapacity plus the disappearance of demographic dividend has become an urgent problem for the whole industry in the future.

Judging from the recent G20 summit, experts believe that In the short term, the textile industry may return to its original rhythm. In the second half of this year, it can still fight for orders and continue to rush to export. 。 Without the introduction of new tariffs, confidence in domestic and foreign markets will be boosted. In the short term, China's textile and clothing export orders will be stable, and domestic cotton consumption may also increase. At the same time, China's domestic business inventories and port's external cotton stocks are quite adequate. There will be no problems in cotton supply next year. There are no new changes in foreign fundamentals, Chen cotton and new cotton supply, so there will be no obvious changes in the import cotton market.