Xinjiang Textile Enterprises Barely Maintain A Break Even Due To Preferential Policies

Although the domestic cotton planting area declined slightly, thanks to good weather conditions, the new cotton yield per unit area increased, so the market had an increase expectation for the domestic cotton output in 2024. With the end of the new cotton acquisition phase, the new cotton production situation is basically clear. The estimated data of domestic cotton output from various institutions have also been released. According to the estimated data of various institutions, the domestic cotton output in this year is increasing, and the mainstream institutions estimate that the new cotton output in this year is more than 6 million tons.

On the whole, the growth of domestic cotton production in this year has made the supply situation more relaxed. This trend will inhibit the operation of Zheng Mian, and cotton prices may face some downward pressure. 　

The cost of new cotton is fixed. The seed cotton in Xinjiang has been listed since October last year. The purchase and processing progress of ginning plants is fast, and the price of seed cotton fluctuates little. The purchase of seed cotton has basically ended in the middle and late November. In terms of purchase price, the purchase price in Xinjiang is the same, with a similar decline; Mainland prices are slightly lower, with a larger decline. The purchase price range of Xinjiang seed cotton is 6.2~6.4 yuan/kg, and the price of cottonseed is stable. Therefore, the processing cost of Xinjiang lint is 14470~15100 yuan/ton.

The import volume declined month by month. In 2024, China's cotton import volume will increase significantly, and the annual cumulative import will reach 2.37 million tons, with a year-on-year increase of 71.4%. The main reason is that the price of cotton at home and abroad is inverted, and domestic textile mills tend to purchase imported cotton at low prices. However, in the year of 2024/2025, the import volume declined significantly, only 230000 tons in total, a year-on-year decrease of 56.6%, mainly due to the lower than the average level of cotton import sliding tax quota in previous years.

In 2024, the peak season of domestic textile industry consumption orders will not be strong, and the off-season will be even weaker. The cotton yarn sales of most textile enterprises are weak, and some inventories are overstocked. Xinjiang textile enterprises barely maintain a break even due to preferential policies; The immediate profits of mainland enterprises were in a loss state, and only made a short-term profit in September. By the end of November last year, the operating rate of textile mills and weaving mills had declined. Cotton yarn inventory has gradually accumulated, and some enterprises' inventory exceeds 30 days.

In 2025, China will implement incremental policies to expand the domestic circulation. On the whole, the recent changes in the industrial environment have exacerbated the situation of periodic oversupply in the cotton market, and the pressure on enterprises to hedge short orders remains, and the pressure on cotton to continue to decline remains. However, it is worth noting that inventory replenishment by some enterprises has slowed down the decline of cotton futures to a certain extent.