Can refined cotton keep surging in line with cotton linter?

Cotton linter price extended the gains before the Spring Festival as the price has been hiking by around 1,500yuan/mt since the beginning of Feb. Refined cotton price also surged driven by cost, which has gained by around 2,000yuan/mt.

Cottonseed prices are flat to higher under the backdrop of better macro economy and increasing liquidities. Less cottonseed is delivered outside Xinjiang after the holiday and coupled with low feedstock inventory, cottonseed oil plants resumed operation slowly, so there is short cotton linter supply. Most plants become reluctant sellers and the price of cotton linter is picked up rapidly. Moreover, paper pulp price is rising faster and dissolving wood pulp price keeps going up amid tighter supply, so some VSF plants replace dissolving pulp by cotton linter pulp, then the production of cotton linter pulp has increased and there is demand growth for cotton linter with prices hiking. Now cotton linter for industry-grade refined cotton is mostly at 5,500yuan/mt in Chinese inland and that for food-grade refined cotton is over 5,700-5,800yuan/mt, with the higher above 6,000yuan/mt, reaching the level of May 2017.

Refined cotton sales are speeding up with surging price amid economic recovery and continued rising price of cotton linter. At the end of Feb and beginning of Mar, Shandong, Hebei, Jiangsu, Hubei and Xinjiang-based companies significantly raised offers. Now industry-grade refined cotton M1000 is mainly offered around 10,500yuan/mt and food-grade refined cotton is offered around 11,500yuan/mt, hitting almost 4-year high.

In conclusion, cottonseed market keeps strong with prices flat to higher and cotton linter price maintains uptrend amid short availability (the higher price of cotton linter for food-grade refined cotton in Shandong and Hebei has breached 6,000yuan/mt). Refined cotton price driven by cost has hit 4-year high, but it is harder to be traded at high price and participants should remain conscious.