This week, Zheng cotton yarn CY2405 contract opened a strong rising rhythm, of which the main CY2405 contract rose from 20,960 yuan/ton to 22065 yuan/ton in only three trading days, an increase of 5.27%.

From the feedback of cotton mills in Henan, Hubei, Shandong and other places, the spot price of cotton yarn after the holiday is generally raised by 200-300 yuan/ton, which can not keep up with the rising strength of cotton yarn futures. From the statistical point of view, the performance of cotton yarn futures after the holiday is stronger than most commodity futures, which plays a positive role in the recovery of confidence in cotton spinning enterprises and the narrowing of yarn losses.

Why did cotton futures rise sharply this week? Industry analysis is mainly related to the following four factors:

First, there is a need for cotton and cotton yarn futures spreads to return to normal levels. Since late November, the surface price of CY2405 contract fell from 22,240 yuan/ton to 20,460 yuan/ton, and continued to consolidate in the range of 20,500-21,350 yuan/ton, and the price difference between CY2405 and CF2405 contract once fell below 5,000 yuan/ton. The comprehensive processing cost of textile C32S cotton yarn is generally about 6,500 yuan/ton, and the futures price of cotton yarn is obviously low.

Second, cotton futures and spot are seriously upside down, and there is a need for repair in the market. Since late December, the spot price of C32S cotton yarn market has been higher than the CY2405 contract surface price of 1100-1300 yuan/ton, if taking into account the delivery of financial costs, storage fees, storage fees, transaction delivery fees and other expenses, cotton yarn current price upside down range even reached 1500 yuan/ton, obviously cotton yarn futures prices are too low.

Third, cotton yarn spot market transactions warmed up. C40S and below the number of cotton yarn performance slightly better, most of the spinning yarn inventory effect is significant (cotton mill inventory fell to less than a month), in the context of export orders increased and financial pressure to slow down, cotton yarn futures bullish sentiment.

Fourth, Zheng cotton yarn holdings, daily turnover and warehouse orders are relatively low, and funds are easy to move the pan wide shock. From a statistical point of view, as of January 5, 2023, the CY2405 contract position was more than 4,700 hands, and the number of cotton warehouse receipts was only 123.

Source: China Cotton Network