There Are Many Challenges For The Recovery Of The Market

At present, the new crown epidemic is still the most uncertain factor affecting the global economy and cotton market. The re escalation of the epidemic in the United States and the surge of cases in other countries once again illustrate the difficulty of epidemic prevention and control. The blockade measures of various countries have been basically lifted and the economy has indeed recovered. Overall, consumer spending on clothing has decreased year on year. From March to June, American consumers' spending on clothing consumption decreased by 26%, 44%, 23% and 2% respectively. The retail sales of textiles, clothing and footwear in EU decreased by 55%, 78%, 35% and 26% respectively. Japan's clothing consumption expenditure decreased by 30%, 58%, 42% and 7% respectively.

Due to the sharp decrease of consumer's clothing expenditure, clothing import has also been significantly affected. From March to June, US clothing imports decreased by 15%, 43%, 57% and 34% respectively. From March to may, EU clothing imports decreased by 11%, 38% and 50% respectively. From February to June, Japan's clothing imports decreased by 39%, 2%, 1%, 29% and 16% respectively.

Although the import volume of clothing decreased, due to the sudden drop in consumer demand, retailers' inventory was high. In the United States, the clothing store inventory sales ratio rose to an all-time high, with April's figure more than seven times the 2019 average. Although the recent increase in sales has reduced the proportion, it is still far higher than the level before the outbreak. The may figure is still 2.5 times the 2019 average.

From the upstream, the clothing manufacturing industry has not yet released inventory data, but it can be considered that the reduction of consumer demand and retail orders has led to a substantial increase in the supply of gauze, especially cotton supply. In 2019 / 20, the U.S. Department of Agriculture estimates that the global end of term inventory growth is the second highest in history, with a year-on-year increase of 20.3 million bales, second only to 22.8 million bales in 2011 / 12.

In 2020 / 21, the growth of global cotton inventory is expected to decrease significantly, increasing by 1.9 million bales year on year. The year 2020 / 21 has just begun, and it will take quite a long time for the epidemic situation and the economy to recover. Even in the most optimistic scenario, in which the virus is completely controlled and the economy starts to rebound, textile mill demand growth will still lag behind demand growth due to high product inventories.

At the same time, tensions between China and the United States remain a major uncertainty in the market. Since April this year, it is not known whether China's total demand for cotton will continue to be implemented in the first stage of April.