Outbreak of novel coronavirus outside China and the state cotton reserves

Outbreak of novel coronavirus outside China and the state cotton reserves

Recently, the novel coronavirus situation is still accelerating outside China, and the volatile financial and commodity market triggers the pessimistic sentiment in the market. ICE cotton futures market hit a low of 50.68cent/lb. The purchasing volumes of US cotton from China and Vietnam are reducing with the lower orders, so US cotton faces certain consumption pressure. Zhengzhou major cotton contract, May contract, dipped below 10,000yuan/mt on March 24, and downstream spinning mills faced delay of order delivery and cancellation. Traders also faced inventory and selling pressure. In general, cotton market supply is ample, but demand is sluggish. In short, the market will be under the impact of the novel coronavirus and market sentiment will be not optimistic before the turning point of virus. Under such condition, the inventory and selling pressure of sellers can be eased somewhat to sell cotton to the state warehouses. However, the delivery of reserved cotton was extended from 45 days to 70 days from Jan 15, which posed certain impact on the cash flow of sellers. Besides, the package requirement of reserved cotton also influenced the reserving volumes. Therefore, sellers were inclined to sell cotton to the government affected by the virus and low market demand, but due to the issues mentioned above, the trading proportion could not keep high.