Will cotton yarn be spurred by the surge of cotton

ZCE cotton futures soared immediately after a telephone conversation between China and US leaders and approached limit up. Under the expectation of eased China-US relation, market sentiment recovers somewhat on the whole. Thus what about the cotton yarn market amid the surge of cotton?

1. Price inquiries improve but the orders does not follow up.
Since last week, ZCE cotton futures has climbed up 1,000yuan/mt from the bottom and spot cotton up 800yuan/mt, but it is not well accepted by cotton yarn mills which keep look-on. Cotton yarn market confidence rallies and price inquiries from downstream plants increase somewhat, but the orders are not placed accordingly.

According to the chart above, inventory of cotton yarn mills declined recently due to much lower operating rate at 45% than the average in previous year. Many small plants shut down and medium to large plants cut production. On the other hand, downstream concerns are alleviated by the stop of decline of ZCE cotton futures. In Addition, cotton yarn mills are active in destocking, which also promotes sales.