Imported yarn stocks and supply and demand outlook in Apr

In terms of supply, Mar arrivals of imported cotton yarn are estimated at about 175.6kt. Due to the favorable expectation to post-holiday peak season, the ordering of forward imported cotton yarn by traders was moderate and Mar arrivals were at normal level, but the stocks increased by 47kt to about 241kt due to poor sales.　

Looking from demand, entering Mar, operating rate of fabric mills retreated from high and traders sold actively, but it was not very effective. In early Mar, operating rate recovered further, especially in Jiangsu and Zhejiang with that in Lanxi improving to 60-80% fastest. Run rate in Shandong and Hebei recovered slowly and that of fabric plants resumed to 35-45%. In Guangdong, it reached 40-50%. Since mid-Mar, many export orders and some local orders were canceled, and market sentiment worsened, causing some weavers to cut production. As a result, their procurement for cotton yarn reduced further.

As for later market, the supply will mainly come from the 240kt if stocks in the ports and 30-day inventory of foreign cotton yarn in Vietnam, India and Pakistan. According to current sales speed, it can sustain over one month. In addition, it may take 10-25 days for foreign stocks to be transported to China. Affected by the pandemic, a lot of orders are delayed or canceled, and Apr arrivals in China may nosedive, but there is no problem in supply. If the pandemic shows turning point in Apr, the consumption may see retaliatory increase. At that time, due to worldwide shutdown of spinning capacity, the market sources may be snatched, and short supply may appear.

As for the pandemic, it continues to spread in Europe and the US, and turning point has not been seen. Optimistically, it may be well controlled as summer comes in the Northern Hemisphere. In Q2, the market may welcome a wave of rebound. If the pandemic does not improve, global consumption will be burdened further. The long pandemic may cause large-scale shutdown which has been occurred in cotton textile industry and bring long-term macro issues. Under this background, counter-cyclical adjustment policy is noteworthy.