MAMBO Market Report, 30th April 2020
MAMBO Market Report, 30th April 2020

MAMBO Market Report, 30th April 2020

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The market continued to stabilise over the week with July settling at 57.12 c/lb, up 75 points in the week.  

 The US and Europe continue to slowly ease their lockdowns and we are nearing closer to a time when people will be able to head out and purchase retails goods, which is so important for our industry. We are not there yet and demand will not return as fast as it was quashed but it is still a positive development. That said, there are still concerns over the affect the virus has had on global economies. The US reported a nearly 5% drop in GDP during the first quarter, with many European countries reporting similar drops and it will likely be worse in the second quarter.  

The UN has also reported this week that 1.6 billion people could potentially lose their jobs because of the virus. Sadly the majority of these losses will be felt in Asia where the virus is spreading faster than it had previously. Our clients and friends in Asia producing the garments and yarns have already been forced to close their factories and lay off their workers in this difficult time. Hopefully a sense of normality can return at some point down the line. 

The market has been buoyed this week by continued purchases from China. There have been good quantities of US cotton sold for June shipment as well as selective purchases of other origins. This cotton is mostly believed to be for the Chinese state reserve. Although this has been a positive development, it doesn’t actually mean that the cotton is for consumption, it simply moves it from one stock pile to another. None the less the market has moved up in light of the action. 

 Elsewhere it has been very difficult to find mills that are willing to buy. There is already a back log of contracts that mills need to perform and as such are not looking to add to their inventories. No more can this drop in demand be felt than in the oil market where prices have plummeted and storage capacity is starting to run out. As we stop driving cars, planes are no longer in the air and factories are closed it is no wonder that that oil prices have crashed like they have. 

The market continues to feel synthetically high, pushed up by the good sales done into China and the slight (improving virus situation) in Europe and the US. It still remains that demand is very poor for other growths, as banks and factories remain closed with ever increasing stocks of cotton. Retailers have been forced to cancel their large scale orders in many Asian countries and any future orders will not be as significant as they had previously. It is still hard to guess where the final global consumption figure could be for this year but one has to believe it has already fallen by 20%. This coupled with increasing stocks of cotton, it doesn’t point to prices moving much higher from here.

Source: Mambo

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