Cotton yarn decline being around the corner

ZCE cotton futures plummeted and hit new low again and again amid the spread of pandemic in the world and slump of crude oil last week. By last Friday, May contracts decreased to 11,690yuan/mt at the lowest, and spot cotton price declined accordingly.

With the slide of raw materials and concerns about later demand upon the pandemic, transactions of cotton yarn weakened and downstream procurement reduced obviously. However, cotton yarn price has not moved down much despite lower cost and poor expectation to downstream demand, as the inventory was low and some varieties were short of supply. But this situation will hardly sustain and the decrease of cotton yarn price is around the corner.

At first, cotton price has decreased about 1,800yuan/mt compared with that in early this year, while cotton yarn price remained stable or even inched up. Currently the spot profit of cotton yarn mills reached 1,000yuan/mt or above. Even if considering the high-priced cotton bought before Spring Festival holiday, their average profit could reach about 500yuan/mt. Upon the weak market, the profit is likely to be compressed.