China Cotton Price Monthly Report - May, 2014

In May, domestic lint spot price continued to move downward, approaching the reserve release transaction price. Cotton purchase was dominated by reserve cotton and import cotton, and very limited market resource is available for mills. By the end of May, CC Index 3128B settled at 17,392 Yuan per ton, 126 Yuan down over the month, and the monthly average price was 17,434 Yuan per ton, 1,003 Yuan down over the month.
The main impacts to the price decline are the reduced voluem of reserve release transaction, rare resources in domestic lint market, sluggish textile demand and outlook, and continued decline of international cotton price.
1.Reserve cotton release decline.
Mills reduced their reserve cotton buying in projection of further cotton price decline, in order to control risks and stocks. At the same time the import quotas issued by government also contributed to the narrowed reserve sales. Till May, reserve cotton release transaction totaled 1,775,200 ton, 28.19% by transaction percentage, including 1,664,800 ton of domestic cotton by 27.38% and 110,500 ton of import cotton by 51.18%.
2.Domestic lint is rare in the market.
Currently the domestic cotton with high quality is rare in the market. Inland cotton sales is difficult due to low quality, and Xinjiang cotton is more welcomed. Most middle or small scale mills complain about no good cotton available and the grade 5 under previous cotton quality standard is far from satisfying.
3.Sluggish textile market.
As textile market come to the traditional off season, in May, domestic cotton yarn price reduced largely and the trend would continue based on mills projection; the cost of the new order starts to be calculated on new season cotton price, amplifying the lost.
4.The declining international cotton price.
In May, international cotton price continued to decline, the monthly average price for nearby contracts of ICE is 90.03 cent/lb, 1.06 cent down over the month. Monthly average price of Cotlook A is 92.82 cent/lb., 1.3 cent down over the month. As for China import cotton, FC Index M has monthly average price of 14,885 Yuan per ton, under 1% tariff and 15,937 Yuan per ton under sliding duties, which are 2,549 Yuan and 1,497 Yuan lower than domestic equivalent cotton price, the price gaps are narrowed down by 687 Yuan and 782 Yuan separately.
Monitored by: Beijing Cotton Outlook Information Consulting limited Company
Monitoring Subject: 100 cotton textile companies in 18 major cotton production or consuming provinces.