The International Trade Environment Is Rapidly Deteriorating, And Cotton Prices Are Under Greater Pressure
The international trade environment is rapidly deteriorating, and cotton prices are under greater pressure
Domestic and international cotton prices first rose and then fell, while domestic and international cotton yarn prices fell. The implementation of equivalent tariffs by the United States has dealt a heavy blow to global financial markets; China's rapid countermeasures against the United States are conducive to stabilizing domestic market confidence. China has entered the spring sowing period for cotton, and the weather in Xinjiang was generally good in early April. It is expected that cotton prices will mainly fluctuate with changes in the macro environment in the near future, and the fluctuation range may expand.
1, Price Review
This week, the spring sowing of new cotton in China started, and the early progress of spring sowing was affected by sandstorms and cooling weather in some areas of southern Xinjiang. Before April 2nd, domestic cotton prices were strong and fluctuating; With the announcement of a reciprocal tariff policy by the United States, involving a 34% increase in tariffs on Chinese goods imported to the United States and the suspension of tariff exemptions for small packages below $800, domestic cotton prices fell sharply on April 3rd. The average settlement price of the main contract of Zhengzhou cotton futures is 13576 yuan/ton, a decrease of 21 yuan/ton or 0.2% from the previous week; The national cotton price B index, which represents the market price of standard grade cotton in mainland China, has an average price of 14815 yuan/ton, an increase of 1 yuan/ton from the previous week.
In the international market, the US Department of Agriculture announced that the intended planting area for US cotton is 9.87 million acres, which is slightly lower than the previous forecast and a year-on-year decrease of 11.8%. International cotton prices rose before April 2nd; After the United States announced its policy of reciprocal tariffs, ICE cotton futures hit the daily limit down on April 3rd; China quickly imposed a 34% tariff on the United States in response, and ICE cotton continued to decline on April 4th. The overall trend of international cotton prices is rising first and then falling, with an average price slightly higher than the previous week.
The average settlement price of the main cotton futures contract in New York was 66.21 cents/pound, an increase of 0.17 cents/pound or 0.3% from the previous week; The international cotton index (M) representing the average landed price of imported cotton at major ports in China has an average price of 76.36 cents/pound, which is equivalent to an import cost of 13287 yuan/ton in Chinese yuan (calculated based on a 1% tariff, excluding port charges and freight), an increase of 290 yuan/ton or 2.2% compared to the previous week. The domestic cotton price is 1528 yuan/ton higher than the international cotton price.
Domestic and international cotton yarn prices have fallen. This week, the average price of C32S combed pure cotton yarn in China was 21000 yuan/ton, a decrease of 47 yuan/ton or 0.2% from the previous week; The average price of regular outer yarn is 21556 yuan/ton, a decrease of 67 yuan/ton or 0.3% from the previous week. The average price of conventional outer yarn is 556 yuan/ton higher than that of domestic yarn, which is 20 yuan/ton lower than the previous week. The price of polyester staple fiber is 6765 yuan/ton, an increase of 22 yuan/ton or 0.3% from the previous week.
2, Market situation outlook
The implementation of equivalent tariffs by the United States has intensified market risk aversion, and ICE cotton futures may fall below the 60 cent mark. The Yale University Budget Lab predicts that after the implementation of "equivalent tariffs" in the United States, if other countries take countermeasures, the price increase of personal consumption expenditure in the United States will expand to 2.1%, and the real GDP growth rate will decrease by 1 percentage point.
In early April, the Chicago Board Options Exchange's VIX index, which measures market panic, rose to 40%, indicating a sharp increase in investor risk aversion. In terms of the cotton market, the situation of global cotton oversupply remains unchanged. According to the International Cotton Advisory Committee's April forecast, global cotton production for 2024/25 will be 25.9 million tons, a year-on-year increase of 7.38% and a month on month increase of 0.82%; The consumption was 25.52 million tons, a year-on-year increase of 2.27%, unchanged from the previous period, with an oversupply of 370000 tons.
According to data from the US Department of Agriculture, as of the week of March 27th, the contracted export volume of US cotton for 2024/25 has slightly rebounded to 31200 tons, still at a recent low; The uncertainty of US trade policy has driven purchasing countries to accelerate shipments, with a weekly shipment volume of 92600 tons, reaching a recent high. Overall, the market panic caused by the rapid escalation of international trade frictions is spreading, and international cotton prices are expected to operate in a lower price range. The main contract price for ICE cotton may drop to the integer level of 60 cents.
The international trade environment is deteriorating rapidly, and domestic cotton prices may face greater pressure. On April 4th, multiple departments issued multiple countermeasures against the United States, including announcing a 34% tariff on all imported goods originating in the United States from April 10th, 2025.
Against the backdrop of accelerated deterioration of the international trade environment, it is expected that inflation will intensify and consumption will shrink domestically in the United States. China's textile and clothing exports to the United States may show a significant decline, and some products may shift from exports to domestic sales, intensifying domestic market competition and putting pressure on domestic cotton prices. Recently, there has been a slight differentiation in downstream cotton yarn shipments in China.
The supply of tightly spun high count yarn is tight and the price is strong, while the market for regular combed yarn is light, with some areas experiencing low-priced selling; Home textile factories have reported a recent decline in new orders, with cotton yarn purchases mainly focused on replenishing inventory for essential needs. After the holiday, large-scale cotton spring sowing will be carried out in China. According to the Xinjiang Agricultural Meteorological Observatory, in early April, most areas of southern Xinjiang will have suitable weather for cotton sowing, and the short-term weather interference on cotton prices is expected to weaken. Overall, China's rapid response to the United States is beneficial for stabilizing short-term market confidence, but it remains to be seen whether the growth of domestic demand can compensate for the decline in the share of textile and clothing exports, and domestic cotton prices are also under pressure.
