Forward imported cotton yarn jumps after Spring Festival holiday

After short cooling before Spring Festival, forward imported cotton yarn price surged quickly during and after Spring Festival with some varieties exceeding pre-holiday high.

On the back of sharp increase in US cotton before Spring Festival (Feb 11), Indian traders adjusted up offers of forward imported cotton yarn quickly by 5-10cents/kg at first and then raised further during the holiday with an average increase of 15-20cents/kg. After the holiday, the offers of Indian C16S, 21S, 32S and combed 32S all saw an increase over 5%, except open-end ones.

Some traders reflected more buying from China and the transactions for Mar shipment performed well after the price moved down before the holiday. During the holiday, overall trades were modest, and the procurement of Indian cotton yarn was mainly contributed by Bangladesh with bleak buying from China. Especially open-end cotton yarn with Apr shipment was traded slowly. Spinners and traders were optimistic to later market demand. Some traders said they were not eager to sell and expected to find a new trade balance.

As for Vietnamese cotton yarn, OEC21S bleachable and C32S for air jet both saw an increase over 5% in offers, and the latter even increased by 7.57%.

The sales of open-end cotton yarn moved slowly and the transactions after the holiday were also bleak. Some spinners reported that the shipment of open-end cotton yarn, contamination free, was in Apr, and that of ring-spun one has been scheduled to May. In addition, bleachable one has Mar shipments. The trades done by Chinese buyers were sparse. Some traders with Vietnamese cotton yarn preferred to wait and see on high price.

In terms of Pakistan, siro-spun cotton yarn was offered $25-30/bale higher. First-lined siro-spun cotton yarn increased by about 5% and second-lined one increased by over 6%. For example, a trader offered a second-lined siro-spun C10S at $485/bale before the holiday and $525/bale after the holiday (Feb 19), with an increase of $40/bale.

Some traders reported good trades during Spring Festival holiday and a lot of buying was from China. The major shipment was in Mar before the holiday and once scheduled to end-Apr to early May after the holiday. Most traders adjusted up prices after the holiday and some said they would increase price or keep price high to try higher traded price. Most traders held optimistic attitude to later market. However, the over high price slowed down post-holiday transactions and some traders reported little buying.

After the holiday, forward imported cotton yarn turned higher than spot one. The chart below showed the growth rate comparison. The growth rate of forward one was all over 5% while that of spot one at 2%. The reverse hindered trades on the market and most Chinese traders stayed on the sidelines.

Remarks: the price was calculated using data from CCFGroup.

The reasons of the reverse in prices were: 1. Rise of raw materials. 2. Strong local demand. 3. Commodity inflation caused by overflow of global monetary liquidity.

During the holiday, Indian MCX spot cotton price climbed up alongside ICE cotton futures, raising production cost of cotton yarn. Major contracts for ICE cotton futures closed at 82.61cents/kg on Feb 6 while surged 9.17% to 90.19cents/kg. And spot Indian cotton also jumped from 43,600rupee/candy to 45,000rupee/candy, with an increase of 1400rupee or 3.2%. The increase in cotton yarn was much more than raw materials. It can be seen that the consumption and demand in local market also supported the rise of cotton yarn price.