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International Cotton Market Weekly Update Report...

International Cotton Market Weekly Update Report...

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Published by cottontrade
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Published by: cottontrade on Oct 19, 2013
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Dt : 19/10/2013
New York cotton futures move sideways this week
 Just when it felt like the market was getting ready to challenge major support below 82 cents, a latesession rally lifted values back into the ‘comfort zone’. It is not clear what prompted the buying of some 2’500December near the close, with potential reasons ranging from the lifting of hedges against export business torumors about China’s Reserve sales policy.China was an active buyer this week, as mills were trying to fill newly issued quotas, rumored to be in excessof 250’000 tons, that require cotton to be imported before the 20th of December. With prompt availability beingone of the main factors, buyers considered a wide variety of high grades from origins like Greece, Mexico,India, the US, Australia, Spain or Brazil, and prices paid were in the mid 90s.This latest round of Chinese buying has further reduced the remaining old crop inventory, both at origin andon consignment in China, and with new crop arriving slower than normal this season, we have yet to see anysupply pressure.Some traders begin to question whether we will see much crop pressure at all, because China continues toimport at a decent pace and many other markets still have plenty of holes to fill, while the US and India havealready committed sizable volumes that they need to cover first. In other words, it may take a while before thepipeline fills up to level at which there is excess supply to pressure the market.The pace of Chinese imports remains the main price driver in our opinion, with China currently expected tomore or less absorb the production surplus of around 11 million bales in the rest of the world. This week welearned that China imported 925'000 bales in September, which brings the total for the first two months of theseason to 2.13 million bales, which equates to an annualized pace of 12.8 million bales.Considering that mills just received a batch of quotas of over a million bales and that there will be anotherTRQ (Tariff Rate Quota) of 4.0 million bales issued in early 2014, imports of 10+ million bales seem certainlywithin reach.The Certified Stock continued to grow this week and as of this morning it measured nearly 95’000 bales,including bales under review. One has to wonder why this cotton, most of which consists of 3135 and higher
grades, is not being moved to China given their appetite for ready to ship imports.Maybe the reason is that merchants prefer to use it as a tool to force carry into the market, which seems to beworking, since the Dec/March spread has gone from a 300-point inversion to more than 100 points carry overthe past couple of months. However, we wouldn’t rule out a sudden disappearance of this certified stock justyet!Yesterday the US government finally ended its shutdown by kicking the can further down the road, hoping tofind a resolution to the debt issue over the next couple of months. It will still be several days before the USDAand CFTC are up and running again, so we will have to wait a little longer before we get updated export andcommitment of traders data.Despite all the negative local and international press the US is getting these days, there are a number ofpositives for the US economy going forward. Who would have thought a few years back that US oilproduction would rise to a 20-year high of 7.5 million barrels a day in 2013, thanks mainly to large-scale oilshale exploration in North Dakota and Texas. This upward trend in oil production is likely to continue andforecasts call for up to 9.5 million barrels/day by 2015, close to the record 9.6 million barrels/day of 1970. If natural gas liquids and biofuels are added to crude, then the US will become the world's biggest producer ofliquids in 2013 with 12.1 million barrels/day, ahead of Saudi Arabia and Russia. Including other energysources such as natural gas, coal, solar and wind, the US is currently meeting 87 percent of its energy needsand is on its way to become energy independent. With Canada added to the equation, it is already there! Bycontrast, the EU produces less than 50% of its energy needs and dependency on crude oil imports is at over80% and for natural gas it is over 60%.This US energy boom has far-reaching economic and geo-political implications. With US oil imports at just 40percent of 2005 levels, the US trade deficit is improving rapidly and the fact that the US can offer cheaperenergy to companies than other countries is bringing some manufacturing back to the States, especially sincelabor arbitrage is less of a factor these days in view of improved automatization and robotics. Definitelysomething to consider before getting too negative on the US economy and the dollar!So where do we go from here? Prices are still in a long-term sideways trend, with long and short-term movingaverages basically flatlined, volatility at a multi-year low and momentum almost nonexistent. As long as Chinakeeps absorbing the surplus in the rest of the world, stocks outside China won't change much and the marketmay therefore not have a lot of wiggle room going forward.Looking out for potential game changers, a Chinese policy shift is still on top of the list, although we don'tthink that it would necessarily have to be bearish like most analysts believe. Weather is still a factor at thispoint, although harvest conditions have been surprisingly benign so far and time for something bad to happenis soon running out. All things considered we currently see no reason for the market to break out of its boringsideways trend.
China’s Yarn Expo Autumn to start from Oct 21
With an increase in the number of exhibitors at this year’s Yarn Expo Autumn, visitors to the fair areguaranteed a greater sourcing choice of fibres and yarns. Nearly 150 suppliers from 13 countries and regions,including China, Bangladesh, Hong Kong, India, Indonesia, Italy, Korea, Lithuania, Pakistan, Singapore, SriLanka, Thailand and Turkey will be present from 21 – 23 October at the Shanghai New International ExpoCentre.A large factor in the growth this year is the increased participation from South Asia. The India Pavilion playshost to over 50 exhibitors who will display the latest dyed and fancy cotton yarns and natural fibres, varietiesof single, twisted, compact, gassed, mercerised and crepe yarns for knitwear and weaving, as well as 100%cotton and linen yarns.The strong presence of Indian exhibitors again this year proves the continual growing business opportunitiesin the Chinese market, the Joint Director at pavilion organiser Texprocil, Ravi Narayanaswamy believes.“There is a large gap between the supply and demand of yarn in China at the moment,” he says. “What’smore, in recent years the awareness of the high quality of Indian yarn has increased in China so manyexhibitors are returning to the fair again to take advantage of these factors.”The Pakistan Zone is also larger with 21 manufacturers offering competitively priced cotton yarns, more thantriple compared with last year. “The exhibitor growth from both of these countries confirms the status of thisfair as the best platform for gaining access to the Chinese market,” said Wendy Wen, Senior General Managerof Messe Frankfurt (HK) Ltd. “It also shows that despite the recent economic slowdown overseas suppliers areoptimistic and feel there is still room for growth in this market.”
Industry-leading domestic suppliers to feature
 In addition to the increased international presence, a number of leading Chinese suppliers will also take part toincrease trading opportunities which include Fulida Group Hangzhou, one of China’s top 500 privatecompanies. They produce cotton, chemical fibres, differentiated chemical fibre blended yarns, viscose staplefibres, dyed polyester filament and more. Shanghai Tenbro Bamboo Textile were one of the first producers ofbamboo fibre in China, and also supply bamboo pulp and siro yarn. And Shandong Helon are specialists inviscose fibres and tyre cord fabrics.Key domestic yarn suppliers include China Resources Textile and Changtai Xindeli Textiles Development. Theformer produces high-count yarn, knitting yarn, twisted yarn and other varities, while the later is a supplier oftwisted yarn that is free of knots, is heat-set and is suitable for warping.Three other events will take place concurrently with Yarn Expo Autumn, thus creating synergy effects forbuyers. This includes Intertextile Shanghai Apparel Fabrics 2013 which is located in halls E1 – E7, N1 – N3 andW1 – W5, as well as the PH Value fair (previously known as the China International Knitting Trade Fair) inhalls N4 – N5. On 22 October the Planet Textiles Conference will be held in the Kerry Hotel, which is locatedalongside the Shanghai New International Expo Centre.

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