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Insight | Time: Sep 21 2022 9:13AM  Editor:Elsa Wang
Some problems in cotton yarn market amid peak season
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The sales in cotton yarn market have gradually improved since August. In September, the sales of cotton yarn continued to accelerate and the inventory of cotton yarn mills reduced fast. In some areas, the prices rose. However, there were some problems in the market at the same time.

1. Domestic orders prevailed


According to CCFGroup鈥檚 survey, downstream orders were mostly from domestic market for autumn and winter. Therefore, cotton yarn demand was mainly for varieties of 32 counts and count number below that, which led to tight supply and firm prices of carded 21/32S and open-end yarn in current market, while the combed and high-count yarns sales remained slack despite of slight improvement and the inventory reduction of cotton yarn mills was relatively hard, and prices were mostly stable.

2. The resistance to price rise was still great

Market players鈥 expectation was still not optimistic, although downstream orders recovered obviously in September, On the one hand, orders were mainly from domestic market and the  persistence was uncertain. The demand may weaken in the second half of September, and it was heard that the trades in Guangdong have already slipped. On the other hand, most market players expected a low prices of new cotton this year considering the huge loss of ginners last year. . In addition, cotton futures market also faced hedging pressure. Therefore, the willingness of large and continuous procurement was not strong, and the acceptance of high prices was relatively low amid the uncertainty of both future orders and cotton prices. The main business ideas of cotton yarn mills are digesting the inventory, maintaining low inventory and taking orders, which leads to the resistance to price rise even the variety has been sold well.

3. Cotton yarn exports increased, but hard to rise further

More domestic cotton yarn mills and traders did cotton yarn export business from August as foreign cotton prices were far higher than domestic one for a long time.. Cotton yarns were mostly exported to Southeast Asian countries which had no traceable requirements on cotton. The export varieties were 21-40S cotton yarn and compact-spun yarn or combed yarns and the export prices were 500-1000 yuan/mt higher than domestic prices. However, the export business took up a lot of capital and the credibility of foreign mills and traders was also worrying, making export volume difficult to increase further. If foreign cotton prices continue to be higher than domestic one, cotton yarn exports will continue to increase.

To sum up, the sales of cotton yarn is relatively good recently and the inventory of cotton yarn mills has also reduced to the normal level in previous year. The operating rate has gradually recovered, and cotton yarn mills also gain profit. However, the orders are mostly from domestic market and may not persistwhile the export sales also lack impetus. In July, US textiles and apparel imports experienced a cliff-like decline. The imports of Europe are expected to be pessimistic under the pressure of economic downturn and high inflation. Besides, the sanction on Xinjiang cotton is still serious. In addition to US, the European Commission recently proposed a new proposal mentioning that the products produced by forced labor could neither be sold in EU nor exported from EU. Although the name is not mentioned, the previous market rumored that Europe will also ban the imports made of Xinjiang cotton after December (unconfirmed). If the rumor is true, the exports of Chinese cotton products will be hit again. In general, the follow-up cotton yarn market is at greater risk of uncertainty.

[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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