Cotton yarn market improves with the release of epidemic control policy
Epidemic control policy turned over suddenly since last week, and the constant release of epidemic control in different cities of China made prices rise in financial markets including commodity and stock market. The influence on spot cotton yarn market delayed slightly, but the improvement was showed this week. So how much effect did the release of epidemic control have on current cotton yarn market?
1. Operating rate of cotton yarn mills moves up
In the second of Nov, epidemic broke out in different regions of China, making main cotton yarn producing places including Shandong, Henan, Hebei and Hunan affected by it. The suspension of production in cotton yarn mills was always heard, making the operating rate of cotton yarn mills reduce continuously to the lowest level within the year. (Exclude Spring Festival) Epidemic control policy has released since the second half of Nov, and the control time of cotton yarn mills was not long and mostly lasted for 7-10days., Suspension of production in some enterprises was over Last week, and some mills recovered operation and production. Epidemic control policy continued to release this week, and Guangdong Zhongda fabric market will reopen soon. The recovery of operation continuously increased in textile enterprises of other regions that suspended production at previous stage due to epidemic. Cotton yarn mills in Xinjiang gradually recovered, and the operating rate rose obviously, and will continue to move up in the future. However, the recovery of operation still needed a period of time due to long-term production suspension and loss of workers. Some Chinese cotton yarn mills still didn’t recover to normal production due to the loss of spinning and the difficulty of procuring cotton. As end-Dec is about to come, it is hard for mills to recover operating rate to the high level in Sep.
2. Trades improve, and the inventory of cotton yarn mills reduces
On the one hand, the expectation on future cotton yarn market turned from pessimistic to slightly optimistic as the release of epidemic control policy increased the confidence of market participants and ZCE cotton futures were firm. Downstream fabric mills and traders had few stocks in hand, and the stocking willingness increased obviously compared to previous stage. On the other hand, it was heard that orders in fabric mills improved, and the holiday planned at previous time delayed. Guangdong Zhongda fabric market had few stocks, so the traders there had firm demand for restocking after the opening of market. The rigid demand improved on the whole. Besides, the operating rate of cotton yarn mills was still relatively low, and the inventory began to reduce amid the improvement of demand.
3. Some offers rise, but actual traded prices follow slowly
Price-rising sentiment moved up with the improvement of sales and firm ZCE cotton futures. Offers in some mills rose by 200-500yuan/mt, and the discounts given at previous stage were canceled. Actually, the trading sentiment was still not as good as that in previous year. The inventory of cotton yarn mills was not low, and cotton yarn prices were still hard to rise. If future market sustains, cotton yarn prices may usher in rising. After all, overall cotton yarn inventory pressure has released compared with early this year in terms of overall stocking volume.
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