Imported yarn delivery delays, Sep cotton yarn imports may increase

1. Cotton yarn imports of China are forecast at 73.7kt in Sep, down about 58.9% on year and up 11.33% on month

As it is shown in the diagram above, cotton yarn imports have shown a step-like decline since March this year, and cotton yarn imports shrank sharply mainly due to the lack of domestic demand and ordering chance. Until the first half of July, spot market ushered restocking chance at low level after prices of ICE cotton futures fell back, and cotton yarn imports rose again since August. According to CCFGroup’s survey, cotton yarn imports will arrive intensively in the first half of September. The preliminary assessment of cotton yarn imports will reach 73.7Kt in September, down 58.9% on year and up about 11.33% on month with the increase of more than 8Kt.

According to export data released by Vietnamese Customs, Vietnamese yarn exported to China this year accounted for around 50%. Market share of China improved in intensive ordering period such as April and August. Thus, Vietnamese cotton yarn exported to China will increase in September and may account for 60% of overall imports. On the one hand, the profit of Indian cotton yarn hasn’t recovered fully, so the ordering chance hasn’t come. On the other hand, the previous ordered Uzbekistani yarn was at great losses, making more traders turn to procure Vietnamese yarn. Pakistani yarn exports increased on month according to data released by customs in August, and seasonal restocking of that in China increased obviously. However, Pakistani siro-spun hasn’t arrived at port on time in September due to the delay of shipment after Pakistani flood, so the imports will be at peak in late-October. Some Uzbekistani yarn mills reduced the production of ring-spun yarn as previous cotton prices were too high. In September, low-count Uzbekistani ring-spun yarn imports will also keep at low level. 

2. Structural shortage of imported cotton yarn continues

In the first half of September, cotton yarn imports and the destocking both reached the highest point recently. The overall inventory kept at around 50% of previous year, and structural shortage of imported yarn continued. Firstly, the delivery has always been delayed as cotton prices were continuously high in Southeast Asia and the operating rate of many cotton yarn mills moved down. Secondly, domestic stocking of some varieties such as low-count open-end yarn was obviously insufficient as the usage for that was large recently, and product allocation was more difficult. Thirdly, Chinese market couldn’t accept buying Indian cotton prices with high prices, making Indian combed yarn basically out of stock. Now the price spread between forward imported yarn prices and domestic one has gradually recovered. However, the profit of traders are hard to ensure. In short term, imported yarn will still mostly focus on destocking slowly.

3. Conclusion

Cotton yarn imports have slipped obviously since this year. Amid slack sales and losses for a long time, traders in spot imported yarn market had to reduce the stocking of imported cotton yarn to fit into continuous adjustment of supply and demand situation in China. At present, cotton yarn imports this year is assessed at 1,100Kt, down from 1300Kt. In the future, imported cotton yarn still has chance with continuous falling back of Indian cotton and ICE cotton futures prices. Forward yarn mills may turn over the long-term loss condition, and gradually improve the operating rate. Meanwhile, the compress of cost may recover the profit of imported cotton yarn.