Recently, some textile/fabric companies in Guangdong, Jiangsu, Zhejiang, and other regions have reported a decrease in new orders for all cotton grey fabrics since April, with some specifications experiencing a backlog phenomenon. This is mainly due to the gradual end of domestic demand orders for home textiles, home furnishings, labor protection, shirts, and other products (with consumer end orders being the main ones). In May and June, the low order listing rate of enterprises and the increase in prices for 40S and above combed yarn have also made weaving factories have no intention of stockpiling raw materials such as cotton yarn.
From the survey, it can be seen that although the operating rate of large and medium-sized fabric factories in Guangdong, Fujian, Zhejiang and other regions can still maintain at 70% -80% (with a few enterprises even reaching around 90%), the differentiation is becoming increasingly apparent. Some small and medium-sized enterprises have to take various measures to reduce the operating rate, adjust product structure, and increase the production of blended grey fabric due to domestic demand and export orders being unable to meet production capacity.
A textile enterprise in Suzhou, Jiangsu stated that the production and sales situation of 40S-60S cotton yarn in the market is significantly better than that of 32S and below low count ring spun yarn and OE yarn (60S and JC60S cotton yarn spinning enterprises have tight inventory and significant price increases). Therefore, the company has almost completely abandoned orders below C32S, only accepting orders for 40S and above cotton yarn, while increasing the production of T/C, T/R, R/C and other blended yarns, Mainly considering the possibility of early release of domestic demand orders in the autumn and winter of 2023. From the quotations of some Aksu ginning factories and traders, it can be seen that from April 10th to 11th, the price of long staple cotton for 3136/3137 (strong 40-43CN/TEX) in Xinjiang was concentrated at 23200-23500 yuan/ton, which is also an increase of over 500 yuan/ton compared to mid March.
Industry analysis shows that as the difficulty of maintaining high operating rates for fabric and weaving enterprises increases, pressure is expected to gradually spread to the upper and middle reaches of cotton yarn, cotton yarn, and other industries. The probability of Zheng Cotton's main contract recovering 15000 yuan/ton in the short term decreases, but with the global and Chinese Xinjiang cotton planting area declining in 2023 and weather speculation in cotton producing areas, coupled with the continuation of monetary easing policies in the first half of 2023 and the support of comprehensive costs in Xinjiang's inventory, etc, The extent of the CF2309 contract pullback will not be significant. In the short term, it is advisable to focus on whether strong pressure levels such as 14500 yuan/ton and 14000 yuan/ton can form a bottom push. Cotton processing enterprises should seize the opportunity to sell spot goods, and achieve the goal of early bag placement for high target and high rise cotton sheath protection.
