CNCotton Weekly Summary (December 27-31)
This week (December 27-31), domestic cotton price was steady to higher. World cotton price rebounded. Cotton yarn decline slowed. Polyester staple rebounded.
1. Domestic cotton price was steady to higher
As of December 31, cotton harvest progress reached 97.9%, down 1.8 percentage points from last year. Seed cotton delivery from growers to ginners reached 87.0%, down 6.6 percentage points from year ago. Ginning progress reached 84.9%, down 1.7 percentage points from year ago. Lint cotton sales reached 25.9% of total ginning, down 16.9 points. Xinjiang harvest and delivery neared completion. Cotton ginning reached 78.4%, down 11 points. Cotton sales reached 37.2%, down 16.0 points.
During the week ending December 31, many spinners showed a stronger interest in extending coverage. Some merchants sold cotton at market price. Offtake increased at a steady to higher price level. On December 31, inland grade-3 seed cotton price was offered at 11.50 yuan/kg (25314 yuan/ton equivalent price of lint cotton), up 0.06 yuan/kg or 0.5% from week ago. The Xinjiang seed cotton pirce was 10.82 yuan/kg (24015 yuan/ton equivalent price of lint cotton), unchanged. CNCotton B index, which represents average price of T328 in inland area, was 27760 yuan/ton, up73 yuan or 0.3% from week ago. The Xinjiang T328 price was 27421 yuan/ton, up 83 yuan or 0.3% from week ago. ZCE January contract was 28660 yuan/ton, up 475 yuan or 1.7% from week ago. The CNCE January contract was 27592 yuan/ton, down 60 yuan or 0.2% from week ago.
2. World cotton price rebounded
ICE cotton futures extended the correction during the first half of the week as speculators retreated from the market before New Year. Price rebounded in the second half of the week following a renewed weakness in U.S. dollar. World physical price was also higher. On December 31, ICE March contract was 144.81 cent/lb, down 3.31 cents or 2.2% from week ago. This represents a 7.26 cent or 5.3% increase from the low on December 30. International Cotton Index (M) was 852 yuan or 2.8% lower at 29146 yuan per ton based on 1% import tax. The index is equivalent to 29431 yuan per ton based on sliding scale tax, down 844 yuan or 2.8%.
3. Cotton yarn decline slowed, polyester staple rebounded
Improving downstream demand provided support to yarn price. Increased orders for polyester yarn lifted polyester staple price. On December 31, C32S was quoted at 33800 yuan/ton, down 100 yuan or 0.3% from week ago. Polyester staple was 12770 yuan/ton, up 400 yuan or 3.2% from week ago.
5. Outlook
Cotton fundamentals have improved lately. Domestic cotton price headed higher but gains are limited by macro environment. Picking up yarn sales has stabilized yarn price. Easing capital flows should allow spinners to expand purchase after holiday. However, tightening monetary policy will cap excessive price gains in the mid-to-long term market.