Cotton yarn to weaken further in traditional peak season 1/12 NM Acrylic Nylon Yarn
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Cotton yarn to weaken further in traditional peak season 1/12 NM Acrylic Nylon Yarn

Views: 0     Author: Site Editor     Publish Time: 2019-04-15      Origin: Site

Cotton yarn market does not embrace peak season as expected in Apr. On the contrary, it steps to slack territory and market sentiment is pessimistic. Thus, how does the cotton yarn market perform and cotton yarn mills operate on earth?

From the perspective of inventory, that in cotton yarn mills is not high, flat with or a bit higher than that in the same period of last year. From the chart above, the inventory was high after 2018 Spring Festival, but then it kept declining quickly especially in Apr when some varieties were short of supply until Jun when the inventory started to rise. In 2019, the inventory of cotton yarn mills was lower than that in Q1 2018, but the market kept prosperous for only one month. By late Mar, cotton yarn market started to weaken and the inventory climbed up. With rising inventory pressure, cotton yarn price was forced down.

During Jan-Apr, 2018, cotton price stably fluctuated, but cotton yarn price showed uptrend, improving the profits of cotton yarn mills. However, since early 2019, cotton price remained volatile to strong and moved up 500-600yuan/mt by now, while cotton yarn prices only increased 200-300yuan/mt after Spring Festival. Recently, cotton yarn prices declined 200-300yuan/mt due to softening market and VAT reduction. Those with good sales stayed stable temporarily. The profits of cotton yarn mills were compressed.

It can be seen from above chart that the profits of cotton yarn mills sustained improving in Jan-Apr, 2018. The spot profit reached 300-500yuan/mt in Apr. Besides, from Mar, 2018, cotton yarn mills gained 500-1000yuan/mt profits in fact upon cheaper state cotton reserves. But in 2019, the state cotton reserves sales was postponed and it is still uncertain. The reserved cotton which was bought by spinners in 2018 has been used up. Spot profits of cotton yarn mills in 2019 remained negative and the profits under one-month cotton inventory just hovered around cost line. As a result, spinners were pessimistic.

Clearance cost of imported cotton yarn decreased much amid 3% VAT rate reduction. The cost of carded 32S moved down by about 600yuan/mt. Stimulated by the weak market situation, price of imported cotton yarn decreased 500yuan/mt, showing price edge against Chinese one. Price inquiries from downstream has preferred to imported cotton yarn. In Apr, imported cotton yarn is expected to arrive at a large amount, which will shock Chinese cotton yarn further.

In conclusion, cotton yarn mills feel bad and are pessimistic to the market, which is mainly attributed to the rising inventory of cotton yarn in peak season, rising cotton yet falling cotton yarn, much lower profits than last year and price edge of imported cotton yarn. For later market, orders to downstream weavers were heard to keep sluggish. Those to large weavers can be scheduled for one month while small and medium-sized ones started to accumulate inventory. Given downstream demand is hard to improve, inventory of cotton yarn mills is expected to rise further. In addition, as the substitution from imported cotton yarn appears gradually, domestic cotton yarn price will decline further. But as cotton yarn has come near cost line or even suffered small losses and ZCE cotton futures have been rising recently, cotton yarn market is supported and the price has limited downward room. If ZCE cotton futures surge further, cotton yarn price is likely to keep stable or welcome an increase amid rising cost.