March futures again lost ground this week, settling at 67.91 down over 100 points in the week.
The Coronavirus continued to spread fear as the death toll jumped to over 500, with now a handful of deaths reported outside of China. The virus has rattled commodity markets but China continues with a proactive response and we feel the Hysteria could be a touch overdone, though it has created volatility in the cotton market. President Trump was found not guilty of impeachment charges, a positive for the US markets. China also announced the reduction of tariffs on $75 billion of US goods on Thursday, a continuation of the phase one trade deal agreement.
The USDA report was again very positive, with over 300k bales sold in the week and an excellent shipment figure. It was disappointing not to see China buying, though this was perhaps due to their New Year holiday and the effects of the Coronavirus.
Demand and enquiry was steady throughout the week, though not exceptional. Turkey have been buying large quantities of US cotton and Bangladesh continues to purchase Indian cotton at very competitive prices. Vietnam has been in the market for afloat cotton and Pakistan has been buying West African for nearby shipments. China has also been in the market for Brazil and West African cotton but for second quarter shipments. The enquiry has been there but due to the volatility in the market over the week it has been difficult to put business together.
On the origin side, there have been no West African tenders due to the fall in NYF. Brazil still has around 400k mt left to sell and these are coming through in recaps, though the grade is starting to tail off. In India the CCI have now bought 6.5 million bales, exported 2.5 million bales and local mills have consumed 10 million. If the CCI continues to buy at a steady pace then arrivals will slow up shortly and we will wait with baited breath as to how the CCI decide to sell their large inventory. Certainly one to watch for market direction.
The Coronavirus has created negative sentiment in the market and will likely create a slowdown in activity in China, in terms of factory closures and the movement of goods in and out. The lower market has led to mill fixations and further mill demand which is likely supporting the market at the current levels. If the Coronavirus was to be contained then we do feel that a return to the range of 68 – 72 c/lb trading range is more than likely, until then we will have to see how the world reacts to the virus
Πηγή: Mambo