the quick shift of China’s epidemic policy, leading to the expectation on Chinese demand recovery

In Nov 2022, there was news in circulation about the shift of China’s epidemic policy, and in end Dec, the epidemic ended the peak quickly. The funds traded the Chinese demand recovery expectation in Nov and Dec. In Dec, cotton yarn traders started to purchase, not only reducing the cotton yarn inventory in mills, but also making Southeast Asia increase U.S. cotton purchases as they also purchase yarn from Southeast Asia with RMB appreciation. Then ZCE cotton futures were quite firm and market players paid close attention to the downstream market after the holiday.

Currently, the demand from spinners for cotton is better than that before the holiday. In the first week returning from the holiday, fabric mills and apparel factories purchase cotton yarn and grey fabric, but only for those that are not purchased before the holiday. Therefore, downstream demand is tolerable, but mainly from inventory replenishment, just buyers shift from traders to fabric mills and apparel factories. Demand has not improved much and market players still wait for the further reflection from end-user consumption. In the second week after the holiday, cotton yarn price rise starts to meet resistance.