Cotton yarn moving into ice-cold territory

Closing to Chinese traditional New Year–Spring Festival (Feb 1), cotton yarn market gradually steps into ice-cold territory, seeing dipping price and paled transactions.

Since Nov, it has been highlighted that the significant time window is coming and it is suggested to focus on downstream orders. However, the supplement orders for autumn and winter, and those for spring and summer do not arrive as many as expected. On the contrary, due to the outbreak of COVID-19 pandemic in Dec, downstream demand got bloody-nosed and the market confidence was again depressed.

Cotton yarn prices have dropped quickly since late Nov, with a general decrease over 1,000yuan/mt. At present, open-end 10S was priced at about 16,500yuan/mt, carded 32S at 28,000yuan/mt and compact-spun combed 60S down over 2,000yuan/mt at about 39,000yuan/mt.

In the meantime, the processing profit of cotton yarn mills declined further to the bad with losses up to 2,000-3,000yuan/mt.

Cotton yarn mills and weavers recently lowered run rate. Some weavers even suspended production and took holiday in advance. And more plants are planning advanced holiday.

Despite high inventory pressure, cotton yarn mills still operated at a relatively high rate compared with quickly-dropped run rate of weavers. Amid reduced procurement of weavers and underselling of traders, the sales of cotton yarn mills moved slowly and the inventory continued to rise.

The largest pressure cotton yarn price to face later will come from the high inventory.

Although some weavers plan to replenish before Spring Festival, the volume will be limited amid lack of orders. The coming Jan will see more weavers on holidays, and the ice-cold cotton yarn market will last till Spring Festival.