Driven by Positive Elements, Both Domestic and International Price Increased

By the end of the year, encouraged by a train of positive elements, both domestic and international cotton prices witnessed increase. Last week, the Central Economic Working Conference was held in Beijing, brought forward the overall strategy and major tasks of economic work next year. According to Bureau of Statistics, November domestic sells of textile and apparel increased fast, signaling recovery of downstream demand; cotton reserve volume continued to increase with transaction of grade five cotton. Domestic futures max prices approached the temporary reserve price, and spot price surpassed 19,000 Yuan per ton. International cotton price also rebounded at the new monetary creation policy of US.

Export sales continued to increase, though at rather slow rate, China textile and apparel export valued 21 billion USD in November, up by 2.85% Y/Y, while declined over last month. Domestic sales recovered and the apparel sales of one hundred key retailers of China increased by 23.1% Y/Y, for the first time more than 20% of this year. Cotton import also increased to 304,000 ton in November, and the total import for the first eleven months of 2012 was 4,605,000 ton, 78.9% up Y/Y.

Positive elements encouraged raw material purchase of textiles, and cotton spot price domestically increased steadily. Last weekend CC Index328 settled at 19,053 Yuan per ton, 62 Yuan up over the week. Influenced by limited high grade cotton in spot market and futures warehouse receipts, ZCE cotton futures nearby contract CF301 increased largely to 20,320 Yuan per ton at peak value, approaching the temporary reserve price of this season, and settled at 20,285 Yuan per ton up by 550 Yuan over the week. While at the same time forward contract CF305 only edged upward slightly at expectations of reserve release and import quotas delivery, which was 1,000 Yuan less than CF301. CNCE nearby contract MA1301 has average price of 19,383 Yuan per ton, 69 Yuan up over the week.

On 11th December, grade five cotton closed its first reserve transaction by ginners in Dongying, Shandong province, at volume of 150 ton. By the end of 14th, reserve purchased 4,305,410 ton of cotton during the 2012/13 season, comprising 2,095,920 ton from Xinjiang, and 1,356,360 ton from Inland, and 853,130 ton from key companies. The top three source provinces inland are Shandong by 8.3%, Hubei by 8.2% and Hebei by 5.3%. Up to date, PCC reserve cotton release sold 43,930 ton.

Driving by lint price increase of spot and futures, procurement price of seed cotton continued to increase. According to survey of CCA cotton processing industry, last week (10th /14th December), major type 428 had weekly average procurement price of 8.18 Yuan per kilo, 0.06 Yuan up over the week. The seed cotton market was active, and some ginners turned to futures and spot market.

As for the import cotton, FC Index settled at 85.83 cent per pound at the weekend, which was 13,786 Yuan per ton under 1% tariff, 5,267 Yuan lower than domestic equivalent; and 14,673 Yuan per ton under sliding duties, 4,380 Yuan lower than domestic equivalent.