Nov. 23, 2004
Tuesday Nov. 23, 2004
Volume Cotton, Issue 20041123
Inside This Issue
News Briefs
Causes for Reserve Company’s Slow Purchase
Textile Market in Good Condition during Jan. ~ Sept.
Causes behind High Cotton Import Volume And Price
Cotton Balance Sheet
Price Trends:
CHINA COTTON
Biweekly Market Report
Page 1
Nov. 23, 2004
News Briefs
According to the customs, China’s textile and garment exports valued $27.196 billion and $50.387 billion in the first ten months of this year, up 25.4% and 18.6% respectively on the year-on-year basis.
According to SSB, cloth production registered 1.358 billion meters in Oct. (6% more than the previous month) and 12.171 billion meters in the first ten months of this year, up 26% and 15% respectively on the year-on-year basis.
According to Xinjiang Marketing & Supplying Cooperative, Xinjiang had procured 989,400 MT cotton by Nov. 15, of which 75.3% were procured by the cooperative.
According to Chongqing Textile Industry Management Office, non-state-run textile mills account for 99.5% of the number of textile mills, 85.9% of the local output value, 86.9% of the city’s textile sales revenue.
The caution money proportions of No.1 cotton futures CF412 and CF501 agreements dealed in China Zhengzhou exchange have been increasing to 25 per cent and 10 per cent each since Nov.19。
Causes for Reserve Company’s Slow Purchase
China Cotton Reserve Corp began its 300,000 MT purchase on Nov. 9, but from Nov. 9 to 18, it only purchased 1,500 MT. The slim trading is attributable to the rigorous trade terms.
First, the ceiling price for the purchase is set at $1,387.2/MT, parallel to the China Cotton Price Index but below the market expectation.
Secondly, the minimum trading volume during one transaction must be over 500 MT, beyond most of the small companies’ capability. Generally short of capital, small companies usually procure cotton at textile mills’ orders. Therefore, small companies have a limited cotton stock.
In addition, owing to the low procurement price, 45~55% of the new cotton is still in farmers’ hands.
Textile Market in Good Condition during Jan. ~ Sept.
Despite the government’s macro-control policy, China’s textile industry experienced a stable development in the first three quarters of this year.
First, textile production grew steadily. Cotton yarn, cloth and garments production registered 7.8319 million MT, 20.978 billion meters and 8.43483 billion pieces, up 15.7%, 16.11% and 14.5% respectively on the year-on-year basis.
Secondly, textile mills’ financial condition was healthy. Scale textile mills realized an output value of $137.519 billion, a sales revenue of $130.376 billion, a profit of $33.689 billion and a sales/production ratio of 97.07%, up 25.41%, 27.19%, 19.16% and 0.12% respectively on the year-on-year basis.
Thirdly, exports kept going up. Textile and garments exports and imports valued $70.707 billion and $12.469 billion, up 22.14% and 9.06% respectively on the year-on-year basis. Private and collectively-run companies jointly contributed to 31% of the cotton yarn export value, a sharp increase over the same period of last year. Textile export trade structure was further optimized. Take cotton yarn exports for instance, export volume and value under processing trade accounted for 59% and 56% of the total exports respectively, exceeding the same period of last year by 33% and 45% respectively. Whereas, exports and export value under normal trade dropped 33% and 15% respectively on the year-on-year basis.
Causes behind High Cotton Import Volume And Price
China’s cotton imports hit 1.79 million MT and $3.02 billion in the first three quarters of this year, up 178.51% and 265% respectively on the year-on-year basis. The import value exceeded import quantity by 90% in terms of their increase rate.
There three reasons for the huge cotton imports: First, the textile industry’s demand for cotton during Jan. ~ Sept. reached 5.59 million MT, exceeding the domestic production of 4.86 million MT in 2003. Secondly, 2.392 million MT import quotas were distributed to users at one time at the outset of this year, making large quantities of imports possible. Thirdly, imported cotton price was $1,687.61/MT, 10.86% cheaper than domestic cotton in addition to a better quality.
The import price hike is attributable to the following: First, some importers built a stock with imported cotton in the first half of this year in anticipation of a price hike. Secondly, amid the rising cost of chem. fiber production caused by the oil price upsurge, demand for cotton bulged, triggering a mounting cotton price. Thirdly, some importers purchase cotton by small quantities to avoid risks, only to result in a high settlement price.
Cotton Balance Sheet
According to SSB, China’s yarn production recorded 964,600 MT in Oct. and 8.8 million MT during Jan. ~ Oct., up 27.11% and 16.2% respectively on the year-on-year basis. Shandong, Jiangsu, Henan and Hubei contributed to 25.35%, 20.17%, 9.64% and 7.43% of the nation’s total production in Oct.
Including 676,000 MT cotton consumed by textile mills, 790 MT exports and consumption for other purposes, total consumption is estimated to be 693,000 MT in Oct., 4.15% less than the previous month.
Supply adds up to 3.327 million MT in Oct., including 2.219 million MT new cotton, 30,000 MT imports and 1.078 million MT carryin from the previous month.
Cotton inventory in Oct. is estimated to be 2.634 million MT, up 144.3% over the previous month and 6.81% on the year-on-year basis.
Calculating at the increase rate of 10% recorded in the same period of last year, textile mills may consume 614,000 MT cotton in Nov. this year. With the progress in cotton procurement, cotton inventory is presumed to go up in Nov.
Table, China's Cotton Balance Sheet By Month
Unit：000MT
Month / Carry in / Production / Imports / Total Supply / Textiles / Others / Exports / Total Demand / Carry out2001/02 / 3,590 / 5,324 / 98 / 9,012 / 5,653 / 250 / 74 / 5,977 / 3,035
2002/03 / 3,035 / 4,924 / 681 / 8,639 / 6,555 / 230 / 164 / 6,949 / 1,691
8/03 / 1,691 / 97 / 51 / 1,839 / 610 / 16 / 5 / 631 / 1,208
9/03 / 1,208 / 486 / 21 / 1,715 / 607 / 16 / 2 / 625 / 1,090
10/03 / 1,090 / 1,944 / 13 / 3,046 / 554 / 16 / 10 / 580 / 2,466
11/03 / 2,466 / 2,333 / 52 / 4,851 / 581 / 16 / 10 / 608 / 4,243
12/03 / 4,243 / - / 163 / 4,406 / 613 / 20 / 5 / 638 / 3,769
1/04 / 3,769 / - / 176 / 3,945 / 439 / 20 / 1 / 460 / 3,485
2/04 / 3,485 / - / 291 / 3,776 / 570 / 16 / 1 / 587 / 3,189
3/04 / 3,189 / - / 268 / 3,456 / 619 / 16 / 1 / 636 / 2,820
4/04 / 2,820 / - / 291 / 3,111 / 638 / 16 / 0 / 654 / 2,456
5/04 / 2,456 / - / 227 / 2,683 / 637 / 16 / 0 / 653 / 2,030
6/04 / 2,030 / - / 201 / 2,231 / 686 / 16 / 0 / 702 / 1,529
7/04 / 1,529 / - / 170 / 1,699 / 641 / 16 / 2 / 659 / 1,040
2003/04 / 1,691 / 4,860 / 1,923 / 8,473 / 7,196 / 200 / 38 / 7,434 / 1,040
8/04 / 1,040 / 317 / 100 / 1,457 / 649 / 16 / 1 / 666 / 790
9/04 / 790 / 951 / 60 / 1,801 / 706 / 16 / 1 / 723 / 1,078
10/04 / 1,078 / 2,219 / 30 / 3,327 / 676 / 16 / 1 / 693 / 2,634
11/04 / 2,634 / 2,853 / 50 / 5,537 / 614 / 16 / 1 / 631 / 4,906
2004/05 / 1,040 / 6,339 / 1,400 / 8,779 / 7,500 / 200 / 100 / 7,800 / 979
Note：The Cotton marketing year begins Aug. 1
Price Trends:
Cotton:The average price of standard-grade cotton supplied to mills was US$1,386/MT, down by 0.17% from last week, and down by 0.20% from two weeks ago. In the meantime, the international price, theCotlook A Index average was US$1,089/ton, down1.58% from last week, and down3.09% from two weeks ago. The price difference between the international and domestic markets continued to increase, from US$299.56/MT a week ago to now US$314.33/MT.
The weekly average futures price for December delivery was US$1,491/ton at CZCE, down by 0.09% from last week, and up by 0.41% from two weeks ago; meanwhile, the weekly average futures price for December delivery at New York was US$1,035/ton, up 6.93% from last week, and up6.59% from two weeks ago (Figure 1, 2).
Thanks to the fund shortage of cotton purchasing enterprises, it is foreseen the domestic cotton price shall be stable with slight fall, and the international price shall rally slightly with fluctuations due to more procurement.
(Note: the standard-grade cotton refers to 328grade lint)
Pure Cotton Yarn:The prices of high-grade pure cotton yarn at various major markets were stable with slight fall during this week. The average price of 32-count of 5 textile markets was US$2,215/MT, down by 0.92% from last week and down by 2.18% from that of two weeks ago. The average price of 40-count was US$2,437/MT, down by 0.68% from last week and down by 1.82% from that of two weeks ago (Figure 3)
BOABC deems that Cotton yarn price continued to fall thanks to cotton price fell, cotton yarn price is foreseen to go on falling and cotton price is foreseen to be stable with slight fall in the near future.
(Note: the prices of 32-count and 40-count are the average of the markets of Ningbo, Xiaoshan, Qianqing, Changyi and the Southwest)
Page 1