Domestic cotton prices are difficult to bridge in the short term on the international market

The global and Chinese textile growth is an important basis for us to judge the major chemical fiber varieties such as polyester. The general concern about the transfer of the textile industry to other Asian countries is far less than everyone's feeling. The premium of domestic cotton on the international market will be subject to long-term sustainability of the policy of domestic purchasing and storage and quotas. High cotton prices will affect the demand for domestic cotton products in the long term.

The decline in imports of the world's major textile consumer countries does not need to be overly pessimistic. The major net importing countries, the United States and Japan, have a relatively high level of situation and have increased year-on-year this year. The import of textiles from the EU and South Korea declined significantly. However, with the exception of South Korea, the proportion of textiles and raw materials imported from China by major consumer countries (42%) was stable and there was no trend of substitution. The major Asian textile exporting countries have not replaced China. According to the situation of the four major net textile exporting countries in Asia, the scale of exports in recent years has not been close to that of China, or the export growth has been significantly faster than that of China. For the time being, there is no indication that these countries can use China in the short term. Textile exports are shorter.

China's domestic textile output was affected by slower exports and domestic demand was relatively stable. The domestic textile export delivery value fell with the European and American market demand year-on-year. It is expected to be basically flat (5%) year-on-year throughout the year. Domestic consumption data after eliminating export delivery values ​​are relatively robust (up 11.5%).

Judging from the comparison between major textile consumer countries and exporting countries, we do not see the general concern of the market that Chinese exports are being replaced by emerging Asian countries. The 14% drop in imports to the EU, which has the greatest impact on China, is the main factor affecting domestic exports. However, the current level of decline has reached a historically low level. We expect gradual recovery in the long run to be a high probability event. Moreover, after years of development, domestic consumption has exceeded 80% of the total demand. This growth rate is relatively stable and the market need not excessively demand.

The proportion of cotton as a raw material for textiles has decreased year by year, but the significance of weather vanes is huge.

The balance between supply and demand in the international market is basically balanced, and the high global inventory is mainly due to China. Constrained by China's import quotas in the most important markets, foreign cotton prices are likely to remain weak in the future. Storage and quotas guarantee premiums both inside and outside the cotton, but inhibit downstream demand. The purchasing and storage prices will boost domestic prices and import quotas will limit imports. In the future, the external premium of cotton will continue. The high cost of cotton fabrics and the lack of competitiveness abroad will inhibit downstream demand over the long term.

The domestic cotton price premium on the international market is difficult to bridge in the short term and will dampen domestic downstream demand. Chemical fibers benefit to a certain extent, especially products that have a substitution effect with pure cotton, such as polyester.