Cotton linter uptrend restrained by refined cotton?
Cotton linter price has been rising rapidly since New Year's Day with notable increase, while refined cotton market activity keeps modest without big price volatility.
Seed cotton processing has almost come to an end with less quantity, so cottonseed supply is tightening and ginners as well as traders become reluctant sellers. In addition, the transportation is affected by the second wave of COVID-19 and there are few vehicles available from Xinjiang to other provinces, coupled with high freight cost, so it is hard to talk down cottonseed price. Moreover, commodities have been hiking against the backdrop of abundant liquidities, so cotton by-products especially cotton dreg increased sharply, further pushing up cottonseed market. Since the end of Dec, cottonseed price has been rising by 300-400yuan/mt and cottonseed oil plants have seen sharp increase of cost, so cotton linter price has been forced to be picked up by almost 200yuan/mt.
However, refined cotton market activity is subdued with prices in a dilemma. Rising cotton linter price pushed up by faster increase of cottonseed results in higher feedstock cost of refined cotton. However, refined cotton is restrained by weak end-user demand and the market is under bigger pressure of hazardous chemicals inspection and environmental protection at the end of year. Coupled with the impact of the second wave of COVID-19 in Shijiazhuang of Hebei province, most local plants have suspended operation, exerting big impact on refined cotton and downstream production as well as delivery of goods.
In conclusion, cotton linter price has been bolstered by soaring cottonseed since the end of Dec and refined cotton has gained stronger support from cost, but production and sales have been affected by the second wave of COVID-19 and environmental protection, so more plants in North China have cut or suspended production and trades are thin on the market. Therefore, refined cotton price has not changed much and it also restrains the uptrend of cotton linter.