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Insight | Time: Jun 10 2021 4:07PM
How does open-end cotton yarn depart from its normal way?
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As a sound variety, open-end cotton yarn was outstanding during 2018-2019 amid strong downstream demand. However, it has stayed in weak territory since 2020 with poor sales. Recently, it starts divergent directions.



Price change of open-end and ring-spun cotton yarn
CY C32
Mar 2018 to end-2019
-1645 (-9.48%)
-3110 (-14.36%)
-2825 (-12.26%)
Feb 2020 to end-Sep 2020
-2660 (-16.90%)
-2690 (-14.45%)
-1820 (-8.91%)
End-Sep 2020 to Oct 19 2020
2920 (22.32%)
3580 (22.49%)
3900 (20.97%)
Oct 20  to end-Nov 2020
-1160 (-7.25%)
-1380 (-7.08%)
-1375 (-6.11%)
Dec 2020 to early Mar 2021
1440 (9.70%)
3410 (18.82%)
4745 (22.46%)
Early Mar to mid-Apr 2021
-595 (-3.65%)
-1410 (-6.55%)
-1760 (-6.80%)
Mid-Apr 2021 to date
275 (1.75%)
1580 (7.85%)
1120 (4.65%)

During 2018-2019, open-end cotton yarn kept sold well. Although the price was dragged down by US-China trade war, the decrease of mainstream products like 10-21S was less than ring-spun one. The change happened from 2020, when the demand for open-end cotton yarn started to decline. Before Oct 2020, cotton yarn price stepped downward with open-end one dropping more than ring-spun one. Later on, cotton yarn experienced several waves of rise, but open-end one increased less than ring-spun one. The figure above shows that OEC32S has similar trend to C32S. Recently, open-end 21S and lower-count ones show different ways against 26-32S ones.


According to CCFGroup, since May, sales of higher-count open-end cotton yarn have been healthy, mainly reflected in 26-32S. According to market players, it is mainly because more downstream weavers substitute higher-count open-end cotton yarn for ring-spun one. In May, lower-count open-end cotton yarn price kept stable to weak while higher-count ones were firm. Some mills considered to shift production to lower-count ones.


In terms of the price spread of open-end 32S and ring-spun 32S, it was in uptrend after reaching the low of 800yuan/mt in Jul 2019, and moved up to 4,500yuan/mt at the highest. Although cotton yarn and cotton grey fabric markets both have operated well since last Oct, the latter is not as good as the former. At present, the profits of ring-spun cotton yarn mills remain above 1,000yuan/mt, while that of the weavers just hovers around zero line. Under the cost pressure, weavers more use cheaper open-end cotton yarn instead of ring-spun one. The price spread between them has fallen back recently, but still at a high level.


The sustained weakness of low-count open-end cotton yarn may be attributed to the pandemic. Facing the pandemic, more people have to stay at home in the world, which reduces the demand for denim and business suits. For instead, the demand for comfortable sportswear and home textiles has increased. It is consistent with the sales characteristics of cotton yarn. The demand for high-end cotton yarn over 80S, which is mainly used to make high-end garments like shirts, and low-count open-end cotton yarn mainly made into denim is bad, while those made into hoodies and home textiles are sold obviously better.


[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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