July’22 cotton yarn imports may move down

1. Imported cotton yarn arrivals to China assessment

According to export data of major cotton yarn import origins and initial research of cotton yarn arrivals of China, Jul cotton yarn imports of China is estimated at 88.2kt, down 50% on the year and down 9.3% on the month. Analyzing from the price gap between spot imported yarn and forward one, only orders of Pakistani siro-spun yarn had meager profit from May to June. Therefore, the overall arrivals of imported yarn reduced largely. From June to July, forward imported yarn prices fell quickly in line with the drop of international cotton prices, and the profit of imported Vietnamese cotton yarn recovered again.

At the beginning of July, as forward imported yarn prices fell back, most domestic traders restocked a few Vietnamese woven and knitted yarn to prepare for the sales in the latter half of this year. In terms of shipment, the relatively low-cost Vietnamese yarn are expected to arrive in early-Aug and mid-Aug, while the arrivals of Vietnamese yarn in Jul is estimated to be around 47Kt，as low as Jun’s. Vietnamese yarn and textile industry were undoubtedly hit by the surge of US cotton. The rise of feedstock cost made local cotton yarn mills continuously lower the operating rate to ease the inventory pressure. Meanwhile, China, one of the markets that are sensible to prices, reduced the imports of Vietnamese yarn by around 40% in recent months. Some shipments of Pakistani yarns were delayed to July with an estimated quantity of 14Kt. Uzbekistan yarn exports reduced greatly due to new requests for materials traceability. 

2. Destocking of imported cotton yarn slowed down

The trades depended more on export orders after imported yarn gradually lost price advantage. Downstream procurement willingness was inhibited continuously in late-Jul as foreign and domestic cotton prices fluctuated and dropped. Even though market sold with low prices consistently, the sales in Jul were harder than the same off-season previous year. Mills and traders kept selling for rigid demand after accumulating inventory within narrow range, and the overall destocking was slow.

3. Conclusion

On the one hand, imported yarn arrivals depend on price advantage and market risk . On the other hand, it more rely on market demand. According to latest data, from Jan to Jul 2022, China’s exports of textiles and clothes amounted to about 189.35 billion yuan. The export growth rate of both textiles and clothes reached more than 10%. Beneath firm export demand, cotton clothes export was far worse than chemical fiber product export, which was demonstrated by the great decrease of imported cotton yarns. International cotton price suspended rising temporarily with the reduction of demand. The reduction of demand for spot imported yarn is mostly certain in the latter half of the year, and there will be small peak of arrivals again in Aug.