Opportunity to order Indian cotton yarn coming

Recently, cotton price in India local market moved down due to the large arrivals of seed cotton. It fell back from 6,7000Rupee/Candy to current 65,500Rupee/Candy since Nov 8, with a cumulative decrease of 2.24%. Affected by this, Indian ring-spun cotton yarn and open-end one decline to different degrees.

According to the data released by AGM, during Nov 8-23, the arrivals of 2021/22 seed cotton in India reached 342.9kt, up 58.3kt on the month and 86kt on the year. By Nov 23, the arrivals of 2021/22 seed cotton amounted to 901kt, up 303kt on the year, and down 112kt from recent three years’average.

The sharp rise of seed cotton arrivals is related to more active cotton harvest, but the daily arrivals have not achieved year’s peak–about 155,000 bales equivalent lint. In addition, the price of lint in India local market was also heard to slump further. As a result, Indian cotton yarn prices declined and the price spread between forward and spot ones narrowed. The figure below shows the price change of forward Indian cotton yarn since Nov 8.

Forward Indian cotton yarn prices declined 5-25cents/kg cumulatively since the fall of Indian cotton on Nov 8. Among them, ring-spun one suffered the largest decrease, followed by combed one and open-end one. Even so, traded price of spot Indian cotton yarn in China market kept moving down at the same time amid soft downstream consumption. On the other hand, the weak consolidation of ZCE cotton futures also failed to support cotton yarn. Then the price spread between forward yarn and spot yarn turned high.

Current exchange rate moves with volatility, so it is not workable to set off the costs by exchange rate. As things stand, the price spread between forward and spot Indian cotton yarn is about 800-3,700yuan/mt with ring-spun carded 32S the lowest. However, Chinese traders reported that structural inventory existed on spot market and relatively, carded 21S supply was tighter than carded 32S as well as the sales, but carded 32S performed better than carded 21S in the price spread of forward one and spot one. Indian cotton is likely to move downward further, and Indian cotton yarn may be dragged down later, so traders are suggested to pay attention to forward Indian cotton yarn. Even if the best opportunity has not come, it is worth keeping an eye on it as the opportunity is usually transient.