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Insight | Time: Jul 10 2020 9:16AM
Jun'20 cotton yarn imports may increase 59.1% m-o-m to 152.8kt
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1. Imported cotton yarn arrivals to China assessment

Imported cotton yarn arrivals to China in June 2020 are estimated at 152.8kt, down 5.62% y-o-y and up 59.17% m-o-m. In mid-May, a wave of ordering appeared on the market, and the orders will be delivered in Jun-Jul. Due to much lower cost, this batch of cargos will bring favorable profits to traders if sold at current market price.

According to foreign shipment data in May, arrivals of Vietnamese cotton yarn are estimated at 57kt; that of Indian cotton yarn at 39kt; Pakistani cotton yarn 16.3kt, Uzbekistani cotton yarn at 13kt, Indonesia one at 9kt, that from Taiwan at 6kt, and that of other regions and countries at 12.5kt. (The export data of foreign cotton yarn is lost much and large deviation may exist.)

2. Traders' reflection

Note: Over 30 enterprises are surveyed, covering over 50% of cotton yarn imports.

Major traders and L/C issuing companies expected more arrivals of imported cotton yarn in Jun.

3. Imported yarn stocks and supply and demand outlook in Jul

The stocks in the ports are estimated at 206kt, of which in Jiangsu and Zhejiang are 83.2kt, in Guangdong and Fujian are 94.1kt and in Shandong and Hebei are 29kt. After mid-Jun, arrivals of imported cotton increased a lot. Amid soft demand, traders’ sales moved slowly and their stocks increased quickly, weighing on cotton yarn price. 

Looking from demand, operating rate of fabric mills weakened obviously than that in May. Except for the restriction of the pandemic on the demand, the seasonal weakness was also apparent. Before and after Dragon Boat Festival (Jun 24-26), a lot of fabric mills took holidays. Even if they resumed production after the festival, the operating rate stayed low and has not shown signs of improvement.

In Jiangsu and Zhejiang, the operating rate was relatively high, mainly supported by home textile market in Nantong and encouragement of Lanxi local government. In Foshan, the run rate was less than 30% with high inventory of cotton yarn for knitting and slow sales. The capacity of denim mills and dyeing and printing plants released less than 30%, but the orders may increase in late Jun. In North China, the operating rate of weavers stayed at about 20-30% after entering dull season. The demand in Weifang and Gaoyang was bearish.

At present, the stocks in the ports climbed up quickly while soft demand sustained. As a consequence, imported cotton yarn price is predicted to keep burdened. Current arrivals with lower cost may bring traders good profits if sold at market price. If traders sell at lower price, the market price may decline. In addition, the pressure from L/C issuing of May ordering will appear in end-Aug to early Sep. Traders can hold the cargos and stay on the sidelines. If the market recovers well in Aug, they can sell according to market situation, and if the market keeps dull, the price may slump again. According to CCFGroup, the demand may improve in Aug-Sep and the sales of traders are likely to improve at that time. Cotton yarn price may be burdened in short term, but it is not likely to drop over 1,000yuan/mt.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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