Investigation:Where the future of the cotton spinning industry?

In the context of economic recession， the spread of the COVID-19 pandemic， the changes in Sino-US relations， and the reduction in consumption， how should the cotton spinning industry actively adapt to the post-pandemic era in response to the current changes in the cotton market？

The cotton market fluctuates upwards and needs new boost

Judging from the current spot transactions， there is demand in the market， but in view of the current severe situation， companies are unwilling to keep inventory. From the perspective of the price relationship between cotton and cotton yarn， spinning profits are minimal， which also restricts cotton prices. Looking at the overall situation， Zheng Mians standing stable above 13，000 yuan/ton requires new impetus， or the global pandemic is under control， consumption continues to improve， and the industry actively increases inventory. The rise in cotton prices requires the linkage of consumer， clothing， and spinning mills.

No unilateral market in the cotton market

The pandemic has indeed led to a reduction in terminal consumption in 2020. Recently， the pandemic in Europe has reappeared and the pandemic in India is still expanding， and there is no condition for a sharp rise in the short term. Domestic yarn stocks have always remained low， and yarn prices have been at a low level in the past five years. In this case， it depends on the situation of consumption restoration brought about by pandemic changes. From the perspective of industrial changes， the capacity utilization of the entire terminal is not high， and the operating rate of the grey fabric reaches 30-40 percent at the lowest point. In the future， production capacity must be restored first.

Xinjiang cotton export ban is suspended， effects will gradually appear

Nowadays， some foreign companies have asked Chinese textile companies to write a letter of commitment， requiring that Xinjiang cotton cannot be used. Although it is difficult to implement （cotton and chemical fiber are mixed during spinning， it is difficult to distinguish the difference）， but Chinese textile companies dare not take risks. After signing a letter of commitment， once it is discovered that Xinjiang cotton is used， it may be blacklisted. Therefore， companies will try to avoid using Xinjiang cotton. The worrying situation is that some European Union companies are also following suit， and the impact may be great. Chinas cotton exports account for 30-40 percent （the sum of Europe， U.S. and Japans cotton exports ）， but this effect will gradually appear. After all， Xinjiang cotton is still mainly consumed domestically. A textile company in Henan also stated that all production now uses Xinjiang cotton. If the Xinjiang cotton ban is implemented， the impact will be very large.

The price of cotton and cotton yarn deviated， and the spread widened

Since the recovery of the market， cotton prices have risen slowly， while yarn prices have fallen steadily， and the two trends have deviated. In August， the cotton price rose by about 1，000 yuan/ton， but the cotton yarn fell by 300-500 yuan/ton. The cotton yarn cost was converted according to the cotton consumption rate， and the textile factory had no profit at all. Although companies hope to increase prices， downstream companies do not accept them. If they insist on increasing prices， they will lose customers in the fiercely competitive market.

Keep inventory low and strictly control risks

At present， the cotton yarn inventory of all textile companies is maintained at a low level， basically controlled within half a month， and even some companies have zero or negative inventory， and orders have no profit and can only maintain normal operations. Most textile companies are losing money this year. Now that the companys cotton inventory is less than a month， it is common sense to consider replenishment， but textiles are not profitable. Cotton can only be bought and used at any time. It is understood that there are two main reasons for the current decline in corporate inventory. One is the peak season of production and sales， and the trend of downstream orders has improved； the second is that the company has reduced the operating rate and kept the inventory low. According to the current market， the more inventory the greater the loss； by adjusting the product structure， the output of cotton yarn is reduced and risks are controlled.

Xinjiang cotton processing capacity increases， the purchase price of seed cotton is higher in 2020

The interviewed companies believe that due to the low purchase price of seed cotton in 2019， the ginning plant has serious overcapacity. Compared with 2019， the purchase price of seed cotton in 2020 was expected to be higher or flat， but compared with the same period in previous years， the absolute price is still low level. At present， the purchase price of hand-picked cotton has reached 6.7-6.8 yuan/kg， or even 7.0 yuan/kg， and the discount cost is more than 14，000 yuan/ton； the purchase price of machine-picked cotton is basically 5.7-5.8 yuan/kg. The small quantity does not yet represent the overall price. However， according to the relevant agreement， there will be a loss if not harvesting， and there is still some hope for rushing to harvest.

Local cotton production and quality are stable

It is understood that the color grade of Shandong seed cotton in 2020 is slightly better than 2019， and the length is about 29mm. The strength has not been tested on a large scale. Micronaire was basically below 5.0 （B2） before 2020， and it was around 3.7. Recently， driven by Xinjiangs cotton harvest， the purchase price of seed cotton in the mainland has risen slightly. Now seed cotton processing is at a loss， which has caused the market to wait and see.

After investigation， the reporter believes that in 2020 cotton enterprises and textile enterprises are facing tremendous pressure. In the face of limited Xinjiang cotton resources， the continuous expansion of processing capacity is itself abnormal. For textile companies， the market environment is complex， the price of fancy yarns is deviating， and business operations continue to be in trouble. Towards the end of the year， textile companies may undergo a wave of closure， because companies with high debts may not be able to raise enough funds to maintain normal production. Companies with light debt will continue to move forward steadily. In the postpandemic period， the cotton spinning industry will eventually break through the darkness and usher in the dawn. Whoever can hold on to the end will share the ultimate feast.