Insufficient confidence in ICE cotton not groundless

Currently, ICE cotton futures market has continued to fall to around 75-77cent/lb, and there is no doubt that the biggest driving factor remains the pessimistic expectations for market demand. According to the WTO Oct report, the trade slowdown has involved many countries and commodities, especially steel, office and telecom equipment, textiles and clothing on the manufacturing side. The exact reasons for the economic slowdown are not clear yet, but inflation, high interest rates, the appreciation of the US dollar and geopolitical tensions are all contributing factors.

Globally, the appreciation of the US dollar has caused significant value declines for some commodities. Of particular concern are fuel and mineral products, which have declined by 15%, textiles, which have declined by 16%, and steel, which has declined by 17%. At the same time, clothing products have also declined by 8%. In the US, although clothing imports are gradually recovering, overall import demand remains weak. For example, although the total value of US clothing imports increased by 0.9% in Jul 2023 compared to Jun, the trade value still declined by about 17% compared to the same period last year. The US consumer confidence index also fell again in Aug 2023, indicating that the economic outlook is still filled with worrying shadows. In addition, US clothing imports in Jan-Jul 2023 declined by 22.3% year on year in terms of value and 28% in terms of quantity, the worst performance since the outbreak of the pandemic.

In terms of the market share of U.S. apparel imports, China, the largest exporter of apparel, saw its market share by trade value decrease from 27.2% in 2022 to 24.1% in Jan-Jul 2023, a decrease of about 3.1%. By trade volume, China's market share decreased from 43.1% in 2022 to 40.6% in Jan-Jul 2023, a decrease of about 2.5%. Looking at the past seven years, the share of Chinese apparel exports to the US has been declining year by year, with further possibility of decline.

In Oct, China's textile and clothing exports amounted to US$22.97 billion, a year-on-year decrease of 8.2%. Among them, the export value of yarn/fabric and products was US$10.71 billion, a year-on-year decrease of 5.8%, and a month-on-month decrease of 8%. As the largest demander of US cotton, the performance of downstream demand in China's clothing industry has always been a focus of attention. However, both export and domestic sales performances in the fourth quarter of this year have been far below the expectations for the "golden September and silver October", coupled with gradually weakening US economic data, which further undermines confidence in the US cotton market.