How to break the deadlock of cotton linter market?

After a temporary surge after the Chinese Lunar New Year, cotton linter price has been falling from the ceiling since early-to-mid Mar and accelerated its downtrend. It has gradually stagnated since Apr with the seesaw of supply and demand and external force is required to break the deadlock.

1. Cottonseed price is hard to decline
Cotton by-products have been depressed recently and cottonseed oil plants with weaker profits are eager to talk down the procurement price of cottonseed. However, cottonseed supply has tightened in the later period of 2020/21 crop year, so the price keeps firm currently. In Shandong and Hebei, the price of cottonseed is mainly around 3,140yuan/mt and Xinjiang-origin cotton is at 3,220-3,240yuan/mt in North China.

2. Cotton liner market stagnates
The trading mood of cotton linter market has been subdued after continued sharp price decline in mid-to-late Mar. Few trades are concluded in Shandong, Hebei and Xinjiang and cotton linter prices are at a stalemate. Cotton linter pulp mills and refined cotton plants focus on consuming stocks without showing strong buy interest and some of them are fulfilling previous contracts, so the price fluctuation has been narrowing since Apr.

3. External force is needed to break the deadlock
Cottonseed oil plants are suffering losses amid weak cotton by-products and they are not running with high operating rates, so the output of cotton linter decreases and producers are not eager to sell cotton linter at low prices when cottonseed keeps relatively stable. At the same time, there is no strong demand from cotton linter pulp mills and refined cotton plants who mainly purchase cotton linter on need-only basis, restraining trades of some high-priced linters. Therefore, rising cottonseed price or improving downstream demand is the driving force of breaking the deadlock.

To sum up, cottonseed price keeps firm amid short availability and the procurement price is hard to be talked down by cottonseed oil plants, which is more likely to move upward with tightening supply. Cotton linter producers are unwilling to keep low selling rates bolstered by reducing output and inelastic demand, while downstream plants purchase raw materials on need-only basis and are reluctant to buy linters at high prices, so when the deadlock could be broken depends on the rise of cottonseed price and improvement of downstream demand.