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Insight | Time: Aug 30 2019 11:10AM
An inevitable "protracted war" for polyester/cotton yarn
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Polyester/cotton yarn exports of China reached 2,212mt in Jul, down 23% on the year, and the imports amounted to 1,276mt. The chart below shows the change of polyester/cotton yarn exports during Jan-Jul. It can be seen that the exports increased only in Mar, which was owing to the advanced demand caused by tax reform from Apr, while in other months, the exports shrank to different degrees. Export environment for Chinese polyester/cotton yarn is deteriorating. The continual startups of spinning capacities in Southeast Asia also weaken the competition advantage of Chinese polyester/cotton yarn and affect the export directly.

In terms of import, the volume kept positive y-o-y growth rate all the time except for Mar when it shrank due to expectation of tax reform. The transfer of some spinning capacity to Southeast Asian countries highlighted the advantage of some foreign yarns and strengthened the profit and competiveness of imported cotton yarn in China.

Demand for polyester/cotton yarn has slid obviously since early 2019. Both domestic market and export are burdened. The export status is confirmed from above description, then how about domestic market?

Polyester/cotton yarn price sustains falling, and the inventory keeps rising to the highest since 2016 and does not show downtrend now. According to the major producing areas including Fujian, Shandong and Jiangxi, the sales of polyester/cotton yarn are much poorer than the past years and inventory of most plants hits historical high. In Shandong, the inventory of some plants reaches up to three months. In addition, production cut is seen nationwide, especially in Shandong. At present, polyester/cotton yarn supply is ample and price competition among the plants presents fierce. However, the lower price just spurs the end-user demand limitedly.

Polyester/cotton yarn mills operate under lasting high pressure of late. The depreciation of inventory, financial cost caused by tight capital and lost labor due to production cut will perplex polyester/cotton yarn mills for long. Thus, the poor performance of domestic market and export sales is likely to be normal and the mills need to prepare for the “protracted war”.

[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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