China Cotton Index Monthly Report – October, 2012

Monitored by: Beijing Cotton Outlook Consulting Co., Ltd.
Monitored Subjects: 100 cotton textile companies in 18 major cotton production and consumption Provinces of China

In October, as the new arrivals augmented and reserve purchase of 2012/13 continued, domestic cotton spot price climbed steadily. Although orders for next spring increased for some millers, driving cotton purchase up moderately, the market outlook was still pessimistic with slack actual transactions and worsened company deficits. Reserve trade remains the main channel for agents and its volume has far surpassed last year??s figure at this time.

1. CC Index in October
1.1 Stable spot price.
Supported by reserve, CC Index in October edged upward steadily, though at limited range with textiles very cautious at the still sluggish downstream demand. By the end of October, CC Index328 was 18,709 Yuan per ton, 36 Yuan up over September by 0.2%. The monthly average price was 18,693 Yuan per ton, 54 Yuan up over the month by 0.3%, and 1,023 Yuan down over last October, down by 5.2%.

1.2 Slight increase in inland major production provinces
The monthly average price of type 328 and type 429 in Shandong province was separately 18,659 Yuan per ton and 17,927 Yuan per ton, all 0.2% up over September. Type 328 and type 429 in Hebei province was separately 18,892 Yuan per ton and 18,446 Yuan per ton, 0.2% and 1% up over the month.

1.3 Grade premium continues to decline
Taking CC Index328 as the benchmark, premium of type 129 decreased by 0.2% from 5.7% by the end of September to 5.5% of October, and type 229 decreased by 0.1% from 5.0% of September to 4.9% of August. Premium of type 429 in October was -3.3%, 0.2% less than -3.5% of September, and type 527 decreased from -12.3% to -12.2%, 0.1% less.

2. Major influential factors on domestic cotton price in October
2.1 General sluggish situation with a few encouraging signs
The next Spring order warmed up a little bit the textile market and grey fabric trade increased notably. In 112th Canton Fair, participants decreased distinctively on Y/Y level, the trade value also declined largely, companies generally believe that global demand of next first half year would be even gloomer, and most textiles continue the hand to mouth purchase type.

2.2 Reserve trade was active.
Since the new arrivals come to the market, big-bale ginners were active at purchasing and trading to reserve, which surpassed one million ton within one month, far surpassing last year figure. By the 31st October, reserve trade volume in total was 1.79 million ton, 1.67 million ton more than the same time last year.

2.3 CNCE price declined.
In October, CNCE market declined in all contracts, with MA1212 contract down by 356 Yuan as the furthest. All others decreased by around 300 Yuan.

2.4 FC Index kept declining
FC Index M has monthly average price of 85.62 cent per pound, 2.86 cent down over the month. Which was 13,856 Yuan per ton under 1% tariff, 4,837 Yuan lower than domestic equivalent; and 14,735 Yuan per ton under sliding duties, 3,958 Yuan lower than domestic equivalent; separately 530 Yuan and 426 Yuan further than September.