Locust Disaster Has Gone, Can Zheng Cotton Market Ushered In A Wave Of Surge?

Recently, Zheng cotton rose strongly, and the main contract returned to wan3. At present, the epidemic situation has been controlled, the downstream has been resumed, but the demand is still greatly affected, and the inventory is quite sufficient. Zheng cotton has no basis for the rise.

Slow rise in operating rate

With the control of epidemic situation, since the beginning of last week, textile downstream has been resumed. According to the subregional perspective, the return rate of textile enterprises in Shandong is relatively high, less than 50%, followed by Jiangsu, and the recovery rate in other regions is still low. After the resumption of work, the employment rate of the enterprises is not high due to factors such as staff arrival. As of last Friday, the yarn enterprise operating rate index was 35%, while the grey fabric utilization index was less than 30%.

Textile is a labor-intensive industry, and a production line needs different types of work to cooperate. Because of the need for epidemic prevention and control, it is difficult for the staff to get to the post. Even if the personnel arrive at the work place, it is difficult for them to mount duty immediately because of the isolation demand, and the operating rate is affected. In addition, enterprises also need certain epidemic prevention conditions to return to work, which is also one of the main factors that affect the operating rate. We believe that with the mitigation of the epidemic, the downstream operating rate will be a slow upward process.

Delayed demand for replenishment

In terms of total volume, domestic cotton business inventories in January were 5 million 10 thousand tons, a record high in recent years, an increase of 170 thousand tons over the same period last year. From the sales progress, domestic cotton sales progress is slow. As of February 21st, the national cotton sales rate was 49.1%, an increase of 5.7 percentage points over the same period, an increase of three weeks in a row, and a 47.2% consecutive increase in sales in Xinjiang. The growth rate also dropped for three weeks in a row. According to the national cotton market monitoring system, as early as the beginning of February, the average stock usage days of the enterprises surveyed were about 54.1 days, an increase of 22.2 days, an increase of 9.5 days compared with the same period last year. Among them, the inventory of raw materials in Hunan, Hubei and Hebei provinces is also the largest, and the stock of yarn and grey fabric is also increasing significantly. Yarn inventory for 33.3 days sales, an increase of 13.6 days, an increase of 11.7 days compared to the same period; the inventory of 60.7 days sales, an increase of 17.1 days, an increase of 25.8 days compared to the same period.

In the absence of downstream demand, raw materials, yarn and grey fabrics are in stock. Due to slow reemployment, inventory consumption is slow, it is difficult to stimulate demand for replenishment in the short term.

Locusts have limited impact.

The US Department of agriculture's February supply and demand report cut China's consumption forecast by 1 million bales. The outbreak caused the domestic cotton spinning industry to stop production for about three weeks, and downstream demand was basically stagnant. Even after the outbreak, cotton consumption is unlikely to increase significantly due to inadequate operating rate and poor downstream demand.

Since December last year, locust plague has been spreading in East Africa. Africa, the Red Sea and southwest Asia have become the worst hit areas. Uganda, Tanzania, India and Pakistan have also been threatened. India and Pakistan share 30% of the world's total cotton production. Currently, most of the cotton in India and Pakistan has been harvested. The desert locust may have little effect on the cotton output this year. If it continues, it may pose a potential threat to new cotton products in India and Pakistan. However, according to Xinhua news agency, the locust disaster in India has basically ended. However, the Kunlun mountains in the border area and the Himalaya mountains are obstructing. It is very difficult for locust to get higher in the cold area at the altitude. This desert locusts disaster can hardly affect the Xinjiang area of China.

To sum up, the stock of raw materials is adequate, the downstream rework is slow, the demand for replenishment of the cotton enterprises is delayed, the yarn and grey cloth utilization rate is not high, the terminal demand is reduced, and the cotton textile industry chain's overall vitality is insufficient. 3 - May is the traditional peak season for cotton textile industry in China, focusing on downstream orders and expected changes in cotton planting area in the northern hemisphere.