China Buzz

ZCE and CNCE E-Forward Market prices closed the trading week mixed. At the ZCE, contracts were down 45 to up 50 yuan/ton, equaling about .30 to .33 cents/pound. Lead contract May added 45 to finish out at 12,400 yuan/ton or about 82.29 cents/pound. CNCE prices were down 30 to up 15 yuan/ton (.20 to .10 cents/pound). Domestic lint prices remain very strong with gains of 79 to 94 yuan/ton noted in the inland provinces while in Xinjiang increases of 11 to 12 yuan/ton were recorded. Price strength is primarily a result of a dwindling supply of higher grades as well as from the government’s desire to keep farmers’ interest in planting cotton in the coming weeks, despite an industry wide belief acreage will drop at least 15 percent this year. The bulk of this decline will come from inland provinces, including Henan, Hebei, Jiangsu and Shandong.

Mills have been complaining over the shortage of high grades as well as over the government’s current refusal to release additional import quota. Some mills believe once acreage reductions are known the government will release additional quota on the market in order to help ease prices. Your more vertical mills are keeping 15 to 20 days of cotton on hand while making sure downstream sales are constant. Mills focused on spinning and cloth production remain in serious trouble with little room to maneuver for cotton purchases amid very weak yarn off take.

The yuan is stronger against the dollar this morning, rising .0337% to 6.8354.