Recently, as the Federal Reserve continues to raise interest rates vigorously, the market’s concern about economic recession has become more serious. It is an indisputable fact that cotton demand has declined. The bleak US cotton export last week is a good illustration.
At present, there is a shortage of demand for textile mills around the world, so they can purchase appropriately according to their needs. This situation has lasted for several months. From the initial excessive procurement led to a steady increase in the supply of the industrial chain, which significantly slowed down the purchase of raw materials, to the recent wider geopolitical and macroeconomic concerns that further exacerbated this problem, all these concerns are real, and unconsciously forced textile mills to reduce production and take a wait-and-see attitude towards replenishment.
However, even in the global economic recession, there is still a basic demand for cotton. During the economic crisis, the global cotton consumption still exceeded 108 million bales, and reached 103 million bales during the COVID-19 epidemic. If the textile factory basically does not purchase or only purchases the minimum amount of cotton during the period of sharp price fluctuation in the last three months, it can be assumed that the raw material inventory of the factory is declining or will decline soon, so the textile factory’s replenishment will start to increase at a certain point in the near future. Therefore, although it is not realistic for countries to replenish their stocks in a large area, it can be expected that once futures prices show signs of stabilization, the quantity of textile supply chain will increase, and then the increase in spot trading volume will provide more support for cotton prices.
In the long run, although the current market is suffering from economic recession and consumption decline, and new flowers are about to be listed in large numbers, cotton prices will bear a great downward pressure in the short term, but the American cotton supply has declined significantly this year, and the market supply is not sufficient or even tense in the late year, so the fundamentals are expected to play a role in the late year.
Post time: Oct-18-2022