Market Analysis: Cotton Market Focuses On Seasonal Marginal Improvement

Zheng Mian's main contract fluctuated narrowly on Friday, closing at 15350 yuan/ton. The support from the weakening US dollar was offset by the report of the decline of US cotton export sales. The domestic market sentiment is repeated. Zheng Mian has been running in shock recently, and downstream demand is still the focus of follow-up attention.

According to Huarong Rongda Futures, the purchasing managers' index (PMI) of China's cotton textile industry in November 2023 was 30.18%, down 6.72 percentage points from the previous month, which has dropped sharply for two consecutive months, falling to a historical low. Among them, the index of new orders was flat and slightly increased, but still in the historical low range; The production capacity index and the operating rate index continued to fall sharply to below 40%, indicating that the production capacity was in a state of contraction. The cotton inventory index fell by -5.95%, and the decline in cotton consumption and expected turnover made enterprises reduce their raw material purchases. The cotton yarn inventory index continued to rise rapidly, up 10.71% on a month on month basis, indicating that enterprises were slow to go out of stock and continued to accumulate stock. At present, there is no obvious warming in the downstream market, and yarn shipments in some areas are accelerating, so we still need to pay attention to its sustainable performance.

As for the focus of the market, Zhongtai Futures said that the structural contradiction between the gradual increase of phased supply and spinning loss pressure and the expected cotton production reduction is being repaired, the cost support limits the price decline, and focuses on the low absorption opportunities brought by the improvement of demand margin. Xinhu Futures said that at this stage, the delivery in recent months is supported, and the demand is also seasonal marginal improvement, but it is still not optimistic on a year-on-year basis. At the same time, because the new flower cargo rights are still mainly concentrated in the hands of ginning plants, in view of the small number of suitable hedging positions in the early stage, there is still a strong hedging pressure above Zheng Mian at present, and the overall or maintain range shocks. Considering that the sustainability and extent of demand improvement is unknown, at this stage, it is mainly wait-and-see. After the delivery in recent months, we will pay attention to whether the downstream situation is a flash in the pan or a turnaround. At that time, Zheng Mian may follow suit.

Xinhu Futures said that at this stage, the delivery in recent months is supported, and the demand is also seasonal marginal improvement, but it is still not optimistic on a year-on-year basis. At the same time, because the new flower cargo rights are still mainly concentrated in the hands of ginning plants, in view of the lack of suitable hedging positions in the early stage,

At present, there is still a strong hedging pressure above Zheng Mian, and the overall or interval shocks are mainly maintained. Considering that the sustainability and extent of demand improvement is unknown, at this stage, it is mainly wait-and-see. After the delivery in recent months, we will pay attention to whether the downstream situation is a flash in the pan or a turnaround. At that time, Zheng Mian may follow suit.