Cotton: Consumption Downturn Will Continue

According to WIND's latest statistics, in September 2014, the added value of textile industry increased by 5.3% over the same period last year, slowing by 0.4 percentage points from the previous month.

Looking back on the trend of China's textile industry added value in the past three years, the trend has been downward since the beginning of 2012, but gradually slowed down from the decline in the growth rate.

According to the General Administration of customs data, in September 2014, China's textile and clothing exports amounted to US $28 billion 550 million, an increase of 7.4% over the same period last year, down 1.49 percentage points from the previous month. The growth rate of the textile industry was -6.49%, down 7.1 percentage points from the previous month.

From 1 to September 2014, the total export volume of textiles and clothing in China increased by US $221 billion 930 million, an increase of 5.92% over the same period last year, and the growth rate dropped 6.03 percentage points over the same period last year.

In the year of 2014/2015, because of the implementation of direct subsidy policy, the price of zhengmian shifted downward obviously, and the difference between domestic and foreign cotton prices was narrowed again, especially the price difference under sliding tax.

According to statistics, as of November 5th, the price difference between home and abroad will be reduced to 982 yuan / ton under the sliding tariff, and the price difference will be 3307 yuan / ton under the 1% tariff quota.

Under the guidance of China's cotton import quota tightening policy, it is expected that the cotton price difference will continue to narrow at the later stage and will restrict the running range of the cotton price.

According to the latest global cotton supply and demand data from the US Department of agriculture (USDA), the supply volume of the global cotton market in will be further narrowed than that in 2013/2014, and the supply and demand will change in a favorable direction. However, the overall supply is still oversupply, with an excess of 1 million 239 thousand tons, far below the 2 million 436 thousand tons in 2013/2014.

However, global inventory data in 2014/2015 have been rising steeply all the time. Even if China's inventory data are excluded, the expected end inventory and inventory consumption ratio of 2014/2015 will remain high.

In China, according to the data predicted by USDA, the supply and demand pattern of cotton in 2014/2015 is still showing an excess supply pattern, but the surplus has narrowed down from 2 million 694 thousand tons in 2013/2014 to a shortage of 109 thousand tons.

In terms of end inventory, although 2014/2015 has been reduced by 120 thousand tons over the previous year, it is still a huge volume of 13 million 533 thousand tons, far exceeding cotton consumption in one year.

Based on the data of China's cotton reserves in recent years, China's cotton reserve stock is estimated at 9 million 376 thousand tons, which is enough to meet the cotton consumption demand in 2014/2015.

Therefore, high inventory will continue to restrict the uplink of China's cotton price operation.