Why cotton linter market at a stalemate?

Recently, cotton linter market has been in a stalemate to some extent, with prices facing a "dilemma". Whether this deadlock can be clearly broken in the future still depends on whether the supply or the demand side can exert force.

Since early Mar, driven by the soybean meal and soybean oil markets, the cottonseed oil and cottonseed meal markets have slightly warmed up, but prices still lack upward momentum. Under the pressure of cottonseed costs, cottonseed oil mills are still struggling to be profitable. Cottonseed oil mills and delinting plants are caught in a dilemma, with many experiencing semi-operation. As a result, the increase in cotton linter supply is limited, and producers still intend to quote firmly.

Affected by the rise in cotton linter prices, and support from inelastic downstream demand, refined cotton quotations have risen rapidly since mid-Mar. The producers in Hebei, Shandong, Jiangsu, and Xinjiang have increased their ex-works prices by about 800yuan/mt. Currently, they are following the market situation with flexible prices. The price for industry-grade refined cotton M1000 is around 9,500yuan/mt. Although refined cotton enterprises have reduced losses recently, cost pressures are still apparent. Moreover, with the downturn in the real estate market and the sluggish market for cellulose ethers, the upward momentum of refined cotton prices is weakened, which also weakens the momentum for cotton linter prices to continue rising.

In conclusion, since cotton linter prices have risen in mid-to-late-Mar, the market has gradually become stagnant. From the supply side, cottonseed oil and cottonseed meal remain weak, constraining the operating rates of cottonseed oil mills and delinting plants. The increase in supply of cotton linter is limited, and producers intend to keep firm prices. However, downstream demand is weak, making it difficult for refined cotton prices to rise, weakening the upward momentum for cotton linter.