Market Dynamics: Ice Cotton Up With Execution Risk Increases

2022/3/24 10:42:00 0

Since the first ten days of March, ice cotton futures has started a round of sharp rebound. The main contract in May soared from 115.37 cents / pound to more than 130 cents / pound, with an increase of 14.16% in just two weeks. Funds and speculators have fully released their short selling sentiment, and a large number of cotton cover covers, empty sheets and even hold up.

With the sharp rise of ice, foreign cotton shipping and bonded cotton quotations, some cotton enterprises in Shandong, Jiangsu, Zhejiang, Henan and other places reported that the cotton procurement contracts signed in 2021 / 22 are facing more and more difficulties in implementation, and the concerns of both parties are rising rapidly.

On the one hand, with the sharp rise of the main ice contracts, a large number of on-call point price contracts are suspended. Therefore, the buyer and the seller may postpone the price point through negotiation, or the seller may buy back the contract or even terminate the contract; On the other hand, ICE Futures soared by nearly 15% in a short period of time. For some cotton purchase and sales contracts with only 5% - 10% of the contract deposit, the seller's enthusiasm for timely shipment and delivery dropped significantly compared with January and February. Some exporters and Cotton Traders delayed the delivery and performance of the contract under various pretexts, such as delayed shipping schedule, tight containers, comprehensive upgrading of port epidemic prevention and control, and overweight, It is not uncommon for the seller to buy back the contract (giving the buyer appropriate financial compensation), starting price and breach of contract.

A medium-sized cotton enterprise in Zhangjiagang said that with the rapid rise of the external market and the opening of the 130 cents / pound window in May, the downstream cotton mills and middlemen have reduced or even suspended the port delivery (signed the cotton procurement contract), and turned to wait-and-see or increase the inquiry and pick-up of Xinjiang cotton at Xinjiang's internal and external warehouses.