Outside cotton enters the market with cotton yarn

According to the argument that the cotton out of the port of Shandong Province has a “one-day tour”, the traders will use the processing trade quotas to export the cotton out of the port into cotton yarns at home and then temporarily export them to foreign warehouses, and then enter the domestic market at a low price.

China Yarn Network Reporter believes that the indirect operation of cotton in the domestic market will inevitably cause some pressure on the sale of domestic cotton yarn, and it will also disrupt the order of the cotton yarn market.

At present, the price difference between lint at home and abroad is still around 5,000 yuan/ton. Some foreign-bonded low-grade and low-margin 2011/12 US cotton, Indian cotton and West African cotton prices have dropped to 82 cents/lb or even 80 cents/. Below the pound level, it stimulated the interest of domestic cotton companies and trading companies, and most of them directly applied for the payment of 40% full customs clearance. Cotton stocks outside the port are abundant. If so, the domestic cotton prices will continue to flow into the country and the domestic cotton prices will be under pressure. The rising factors will be lacking, and the prices will remain low or even lower. The processing companies for cost considerations, coupled with the support of the country’s temporary purchase and storage policies, have a very strong willingness to price, so that both parties will be caught in the stage of stalemate in the purchase and sale, and the lint cash market may have “breakpoints”.

According to China's cotton data, in September 2012, China imported 137,440,000 tons of cotton yarn, an increase of 62.29% year-on-year, and exported cotton yarn of 356,220,000 tons, an increase of 52.33% year-on-year. According to the historical data released by the General Administration of Customs, from January to June 2012, China's cumulative import of cotton yarn was 661,300 tons, an increase of 63.24% year-on-year; cumulative export of cotton yarn was 225,500 tons, a year-on-year decrease of 2.97%. In September 2012, the cotton yarn import volume was still at a high level, while the export volume increased significantly from the previous year.

Throughout this way, cotton outside the port enters the country as a low-cost cotton yarn and squeezes into the domestic cotton yarn market. In the absence of a competitive advantage, the domestically-spun yarn market will become even more severe, and domestic cotton yarn prices will become more severe. Under pressure, there will be a risk of further sharp decline. The loss of textile companies will expand, and the phenomenon of limited production and production suspension will gradually increase.

According to a relevant person in charge of a textile company in Shandong, “This year's cotton yarn market has not improved compared to last year. Orders have even decreased and have not increased. The company’s survival pressure is already very high, coupled with the situation of cotton being imported into the market with cotton yarn. The enterprise is undoubtedly aggravated." The reluctant emphasis on not seeing the difficult focus, the company's future path is awkward.

If foreign cotton enters China with such a situation, there will be a lot of pressure on the domestic lint and cotton yarn market: under the support of RMB 20,400/tonne storage and storage price, the ginners will not lower the price of lint in the short term. Textile mill orders and profits will be shrunk, which will cause the cotton market into a chaos.