The state cotton auction to start on May 5 T/R core spandex yarn

The state cotton auction to start on May 5 will supply cheaper cotton for cotton yarn mills, but will it help them turn deficits to profit amid current situation?

After initial calculation, the starting price of state reserved cotton with standard quality in the first week is predicted at about 15,000yuan/mt. According to the past years, the state auction was hot in early stage in 2017-2018 and the price increment was high. Average trading price of the cotton reserves was 300-1000yuan/mt lower than the starting price most of the time except for the period during which cotton yarn futures fluctuated largely, and the price spread with spot cotton ranged in 500-1,500yuan/mt and 1,000-1,500yuan/mt respectively in 2017 and 2018. Thus, average trading price is likely to be 14,000-15,000yuan/mt.

But in 2016-2018, daily sales of cotton reserves reached 30kt while in 2019, it is much lower and only 10kt. Although cotton import quotas increased and overall cotton supply was relatively adequate, the delay of cotton auction shortened the supply of low-grade and cheap cotton. As a result, high-quality cotton at high price cannot draw spinners’ attention. Fortunately, the auction is coming. In addition, traders are not banned to participate in, so the price increment during the auction is expected to be higher than previous years, especially at the early stage. That is to say, price gap between reserved cotton price and spot cotton on the market will not be wide. In general, cotton cost of cotton yarn mills will reduce to a certain extent due to poorer quality, but compared with the past years, the price will not be much lower.