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Insight | Time: Nov 22 2022 3:55PM  Editor:Elsa
Rising cotton price and falling cotton yarn price amid slack demand
 
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Since early-Nov, ZCE cotton futures gradually rebounded and 01 contract has already rebounded about 1,300yuan/mt compared to the low point at previous stage. Regardless of futures rebound, spot cotton prices didn鈥檛 rise greatly, and cotton yarn prices even still dropped. The rising of ZCE cotton futures this time was mainly because of good macro-situation, including the rumors about released epidemic control in China, the falling back of US inflation and the worry about the lack of new cotton ware house receipt. However, the basic condition of industry didn鈥檛 change obviously. The reasons above caused the market with rising cotton price and falling cotton yarn price.


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Orders lacked, and the market was not likely to improve greatly.

 

New orders in fabric mills decreased largely since the second half of Sep, and now orders of fabric mills were at low level. It was heard that export orders for autumn and winter next year began to be sold with few quantities, but domestic orders slipped further after Double Eleven. The inventory in fabric mills moved up, and the operating rate slipped amid the lack of orders and high level of inventory. After entering into Dec, more fabric mills will gradually be on holiday in advance. According to current condition, market was hard to improve largely. However, fabric mills may stock up few before New Year amid the expectation on released epidemic control in China.

 

Cotton yarn mills were at loss again, and more mills may reduce and suspend production.


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Downstream fabric mills kept low operating rate or even gave holiday in advance amid epidemic and the lack of orders, making cotton yarn sales hard. Cotton yarn prices had to fall amid the rising inventory of cotton yarn mills, even though cotton prices didn鈥檛 drop. Now the loss of conventional varieties reached 500-1,000yuan/mt. The transportation of new cotton in Xinjiang was still slow, and more cotton yarn mills chose to reduce or suspend production as cotton prices were hard to decline.

 

The prevailing factor in cotton yarn market now is still demand. In short term, the demand in cotton yarn market is hard to improve greatly amid the lack of orders and bearish expectation in off-season. Cotton yarn prices are expected to be easy to fall and hard to rise amid the accumulation of inventory.


[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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