Market expectations indicate a significant decrease in Xinjiang's planting area next year, which, under favorable stimulus, has continued to drive domestic cotton prices upward. According to the Business Society Commodity Market Analysis System, as of January 5, the spot price of 3128B-grade cotton was 15,603 yuan per ton, representing a 0.4% increase compared to the previous Monday. Domestic cotton market prices have shown a strong and fluctuating trend within a certain range, with diverging movements between domestic and international cotton prices leading to an expanding price gap. On the supply side, growth has been observed. As of January 2, 2025, the total commercial cotton inventory reached 5.2888 million tons, an increase of 123,800 tons compared to the previous week. With the strengthening of cotton prices, downstream textile enterprises have faced significantly higher costs, leading to relatively cautious restocking, while traders have encountered increased pressure to sell. Influenced by the sustained rebound of the U.S. dollar and the general decline in external markets such as U.S. stocks, energy, and agricultural products, ICE cotton futures have predominantly trended downward. The average weekly settlement price for the main ICE cotton futures contract was 64.24 cents per pound, a slight increase of 0.29 cents per pound compared to the previous week, representing a 0.5% rise. Following the sharp increase in cotton prices, textile enterprises have also significantly raised cotton yarn prices. However, due to insufficient acceptance and weak restocking intentions among textile enterprises, raw material inventories have continued to decline. Domestic textile enterprises have maintained relatively high operating rates. The recent rise in cotton prices has provided a cost advantage for enterprises with higher cotton inventories, while those relying on spot purchases have faced substantial price increases, making business operations more challenging. Future market outlook: The pace of cotton sales is faster than last year, and expectations of reduced cotton planting area in Xinjiang for 2026 have strengthened, significantly boosting cotton prices due to anticipated supply contraction. Downstream cotton yarn prices still have some room for increase in response to cotton price fluctuations. However, with rising market risk aversion, it is expected that cotton price fluctuations will be limited.
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