The Tariff Stick Wields To The Global Textile Market, And The Upward Space Is Relatively Limited

In the international market, in February, the United States announced that it would impose 10% and 25% tariffs on imports from China, Canada and Mexico, and that it would impose equivalent tariffs on the goods of all trading partners, and try to cancel the tariff exemption for packages of less than 800 yuan in China, triggering market concerns about inflation in the United States. The Federal Reserve's expectation of interest rate cuts continues to cool, and the commodity market is under pressure, ICE cotton futures prices fell to a new low since September 2020 in the first ten days of February.

Subsequently, international cotton prices rebounded due to the positive news of the increase in exports of American cotton and Brazilian cotton. As of February 25, the settlement price of the main contract of ICE cotton futures was 67.37 cents/pound, up 0.1 cents/pound or 0.15% from the end of last month; The international cotton index (M) representing the average landed price of imported cotton at China's main port was 76.38 cents/pound, which was converted into RMB 13325 yuan/ton of import cost (1% tariff, excluding port fees), down 146 yuan/ton or 1.08% from the end of last month.

In terms of the domestic market, the State Council held an executive meeting to deploy a number of measures to boost consumption. The private enterprise forum was held again after six years, highlighting the strategic consideration of promoting domestic demand, and the market confidence was further enhanced. After the Spring Festival, the domestic market has resumed work in succession, and the startup rate of textile enterprises has risen rapidly. The traditional peak season of "gold, three silver and four silver" is approaching, and the market is expected to improve compared with the previous period. The above favorable factors pushed the domestic cotton price up slightly. The settlement price of the main contract of cotton futures in Zhengzhou Commodity Exchange was 13825 yuan/ton, up 185 yuan/ton from the end of last month, or 1.36%; The national cotton price B index representing the market price of standard lint in the mainland was 14864 yuan/ton, up 199 yuan/ton or 1.36% from the end of last month.

In the international cotton market, the US tariff stick is wielding around the world, and the inflation risk is making a comeback. Since the end of January, the United States has announced the imposition of 10% tariffs on imports from China, which took effect on February 4; A 25% tariff will be imposed on imports from Canada and Mexico, effective March 4. In addition, the President of the United States announced that it would impose reciprocal tariffs on its trading partners and consider imposing additional tariffs on countries that use the value-added tax system. With the announcement and implementation of a series of tariff plans in the United States, the cost of living of its residents has risen, causing the market to worry about the intensification of inflation. The mainstream market forecast is that the Federal Reserve will only cut interest rates once in 2025. According to the data of the US Department of Labor, the US consumer price index rose 3% year-on-year in January, rebounding to the level in June 2024.

Global cotton supply and demand situation in 2024/25

According to the prediction of the U.S. Department of Agriculture in February, the global cotton output in 2024/25 will be 26.23 million tons, an increase of 1.63 million tons year on year, and a continuous increase of 220000 tons month on month; The global cotton consumption was 25.25 million tons, an increase of 260000 tons year on year and 10000 tons month on month; The global cotton supply and demand situation was further relaxed, with the output exceeding the demand expanding to 980000 tons, an increase of 210000 tons month on month; The global cotton inventory consumption ratio was 67.63%, up 3.41 percentage points over the previous year and 0.40 percentage points month on month.

The area of cotton planting in the United States declined. According to the survey conducted by Cotton Farmers Magazine in January 2025, the yield of American cotton production in 2024 is poor, and there is a contrast between cotton prices and input costs. Most cotton farmers are cautious about cotton production in 2025. The National Cotton Council (NCC) predicted that the intended cotton planting area in the United States would decrease by 14.5% year on year in 2025. As the spring planting of cotton in the United States is approaching, the weather conditions in the main cotton producing areas have aroused concern. From the weather conditions in the next 3-4 weeks, the temperature in the American cotton producing areas is high, and the weather in the main cotton producing area, Texas, is relatively dry, which is unfavorable for cotton planting. India's cotton has made rapid progress in listing. According to the data of Indian Cotton Association, as of February 17, the cumulative listing volume of Indian cotton in 2024/25 reached 3.5 million tons, 68% of which was completed, 9 percentage points higher than that of the previous year. Brazil's cotton planting progress is slow. According to the statistics of the National Commodity Supply Company under the Ministry of Agriculture of Brazil, as of February 16, the cotton planting in Brazil in 2024/25 was 95.9%, an increase of 8.5 percentage points month on month and a decrease of 3.1 percentage points year on year.

The supply of major cotton exporting countries accelerated. Recently, the export sales of American cotton and Brazilian cotton have accelerated under the influence of factors such as the decline of international cotton prices and the strong demand of Southeast Asian markets. Since January, the weekly contracted export volume of American cotton in 2024/25 has risen to around 60000 tons, compared with around 40000 tons previously; The shipment volume also accelerated. As of February 13, the weekly shipment volume reached 69000 tons, the highest level since this year. The cumulative shipment volume was 1010000 tons, a year-on-year decrease of 180000 tons, accounting for 42.2% of the export volume predicted by the U.S. Department of Agriculture. In January 2025, Brazil's cotton export volume will reach 416000 tons, up 66% year on year; From August 2024 to January 2025, the cumulative export volume will reach 1.63 million tons, accounting for 58.5% of the predicted export volume.

Southeast Asia's textile and clothing exports continued to increase, while the U.S. clothing consumption margin weakened. According to the data of Wande and the Cambodian Customs General Administration, in January 2025, Vietnam's textile exports increased by 3.4% year on year, and Cambodia's clothing and apparel products exports increased by 35% year on year. Vietnam and Cambodia, as the main clothing suppliers of the EU, the export growth momentum reflects the relatively stable clothing consumption of the EU. The retail consumption of clothing in the United States showed signs of weakening on a month on month basis. According to the data of the U.S. Department of Commerce, in January 2025, the retail sales of clothing and accessories in the United States were $2.64 billion, down 1.17% month on month and up 1.42% year on year. In general, after the implementation of the US tariff increase measures, the cost of imported goods will be increased to a certain extent and consumer demand will be curbed. According to data from the University of Michigan, the US consumer confidence index fell to 64.7 in February from 71.7 in January, the lowest point in 15 months.

The introduction of favorable macro policies enhanced market confidence. On February 10, the State Council held a standing committee to emphasize that boosting consumption is the top priority of expanding domestic demand and strengthening the domestic circulation, and made deployment around improving consumption capacity, tapping consumption potential, creating a secure consumption environment and other aspects. On February 17, the forum for private enterprises was held again after six years, releasing a strong signal of stabilizing economic expectations and boosting confidence in market development. Influenced by the above macro positive news, market confidence has increased and the domestic stock market has risen. With the upcoming National Two Sessions, the market focuses on the setting of economic goals and the adjustment of policy direction. Relevant analysis institutions believe that China's GDP target in 2025 is still expected to be around 5%. From the signal released by the Central Economic Work Conference held at the end of last year, the macroeconomic policy keynote in 2025 will be more active and promising, and the market will increase support for policies and repair the endogenous momentum of the economy.

According to the February data of the National Cotton Market Monitoring System, the domestic cotton output in 2024/25 will be 6.68 million tons, an increase of 770000 tons on a year-on-year basis, which is the second highest point in nearly five years (6.72 million tons in 2022/23 is the highest record in nearly five years); Cotton consumption was 8 million tons, an increase of 100000 tons year on year, and the month on month ratio was the same; The gap between production and demand decreased from 2 million tons last year to 1.32 million tons.

The cotton supply is centralized, the market is active, and the hedging pressure inhibits the rise of cotton prices. According to the data of the National Cotton Market Monitoring System, as of February 20, the national processing rate was 99.2%, down 0.5 percentage point year on year, and 1.0 percentage point higher than the average of the past four years; The national sales rate was 46.3%, up 5.1 percentage points year on year, 0.3 percentage points higher than the average of the past four years. According to the survey, Xinjiang ginning enterprises sold some lint through pre-sale, post pricing and other methods in the early stage, and the cash flow of enterprises was still maintained, and the pressure on repayment was not obvious. As time goes by, enterprises need to speed up the sales progress to collect funds to repay loans. Recently, with the rebound of Zheng Mian's price, the maximum price of the main contract has exceeded 13900 yuan/ton, and the market activity has increased. Xinjiang ginning enterprises actively hedge against risks, restricting the rising space of Zheng Mian's futures price.

With the spring sowing of new cotton approaching in 2025, Document No. 1 emphasizes the development direction of "stable production and quality improvement". According to the data of the national cotton market monitoring system, the cotton output of Xinjiang in 2024/25 was 6.283 million tons, a record high. According to the survey of the national cotton market monitoring system, in 2025, the intended cotton planting area in China will increase by 1.9% year on year, and that in Xinjiang will increase by 3.2% year on year. The situation of sufficient market supply may continue. On February 23, 2025, the No. 1 Document of the Central Government was officially released, which once again defined the promotion direction of "stable production and quality improvement" of cotton market production, and gave reasonable guidance to cotton planting expectations this year.

The traditional peak season is approaching, and the demand remains to be observed. After the Spring Festival, the production confidence of textile enterprises was sufficient, and the startup rate rose rapidly. The startup rate of some enterprises in Nantong, Zhangjiagang and other places in Jiangsu Province reached 100%. Under the combined effect of the rebound of cotton price and the expectation of peak season, some textile enterprises slightly raised their cotton yarn quotations, mostly by 100-300 yuan/ton, but the current market acceptance of price adjustment is not high. After investigation, the number of newly added orders of textile enterprises is relatively limited, and market transactions focus on just in need replenishment. According to the introduction of a home textile enterprise in Nantong, according to the situation in previous years, it should be the peak time for purchasing and ordering, but according to the on-site situation, the number of ordering customers is lower than the same period in previous years, mainly because the sales of terminal products are relatively slow. Considering that the market has just started up after the year, the new orders in the consumer market still need to be observed. If the sales do not improve in the later period, the enterprise will face the pressure of stock accumulation.

The foreign trade environment is poor, and the export market is under pressure. After the implementation of the 10% tariff policy imposed by the United States on China, export enterprises to the United States reflected that under the current tariff range, orders in the United States market could still be maintained, but profit margins were damaged. In the short term, the US tariff policy is basically consistent with the market expectation, and its negative impact has been gradually digested by the market. The domestic cotton price is expected to be stronger. It is worth noting that the Vietnamese government announced that from February 18, 2025, it would stop the policy of exempting small amount of goods imported through express delivery from VAT. Previously, imported goods with a value of less than 1 million Vietnamese dong (about 289 yuan) could be exempted from import tax and VAT when imported through express delivery services. The United States has also proposed to cancel the tariff exemption for packages under $800. In the long run, the imposition of tariffs by the United States and the termination of the "small amount exemption" policy by some countries will have a negative impact on China's export market share and cotton consumption.

To sum up, the range of additional tariffs imposed by the United States on China has been implemented, Trump's tariff baton has been wielded to global trading partners, and the external pressure on the cotton market has been clear in stages. The domestic policy keynote is positive, the traditional peak season of textile is warming up, the cotton textile market is more active, and the mentality of market players has changed positively. Macro and micro market two-way force provides the domestic cotton market with upward mobility, but negative factors still exist. First, it is still a short time for the market to start after the year, and there are limited new orders in the downstream market, so there is doubt whether the orders can be fulfilled in the peak season; Second, recently, the price of cottonseed has risen, the cost line of Xinjiang lint has moved down, and Zheng Mian Futures is blocked near 13900 yuan/ton, so hedging pressure will restrict the rising space of cotton price; Third, the difference between domestic and foreign cotton prices has returned to a high of 1500 yuan/ton (excluding port fees), which has curbed domestic cotton prices. In general, the positive factors have relatively strong traction on the domestic cotton price. It is expected that the cotton market will be dominated by strong fluctuations, but the upward space is relatively limited.