VSF stands out amid steep fluctuation of cotton and PSF futures

After the Spring Festival, the bulk commodity market skyrocketed and textile-related commodities also jumped. However, the market continued to plummet later and the confidence of market players was gradually eroded, so there are bigger divergences between participants who go long and short the market.

May cotton and PSF contract have respectively dropped by 1,290yuan/mt and 1,000yuan/mt from recent highs. Compared with the sharp decline of the two products, VSF stands out as producers still quote steadily. However, the trading volume has posted notable decrease and downstream buyers are less eager to chase up. At the same time, traders as the most sensitive part in the market become active sellers recently.

Inflation expectation is the dominant factor for this wave of market after the Spring Festival. The $1.9 trillion "American Rescue Plan" passed the US Senate and it is uncertain if further stimulus plans will be unveiled. Whether the trend will be reversed needs observation since the $1.9 trillion stimulus package has not had an actual effect. Seen from the industry chain, VSF plants bolstered by cost and pre-sales are eager to quote steadily or even raise the offers. However, there are great divergences among spinners. Producers’ views on the market outlook are mostly based on their own orders. Large-sized plants who have sufficient orders are relatively optimistic about the outlook. Although fresh business is limited at present, most of them keep stable prices with wait-and-see stance. However, small and mid-sized plants are eager to sell products with discounts by lacking orders. Fabric mills hold calm mood without chasing up as the main purpose and most of them are fulfilling pre-holiday orders by using raw materials procured before the Spring Festival.

In summary, the global currency over-issuance may be temporarily suspended, but the actual purchasing power of the over-issuance currency is still ongoing. It is just the fanatical atmosphere that has been eliminated and still too early to conclude the reversal of the trend.