Cotton yarn prices anticipated to decline rather than rise

During the National day holiday, cotton yarn trading slowed down due to the closure of many downstream weaving mills. While spinners also had some days off, their downtime was considerably shorter than that of weaving mills, resulting in an accumulation of inventory. Cotton yarn prices experienced a drop of 300-500yuan/mt, and there was a strong anticipation of further price declines. Additionally, traders increased their low-priced sales. In summary, the cotton yarn market was sluggish throughout the National holiday period.

Compared to the subdued transactions and falling prices for cotton yarn, the cotton market remained firm. Prices for state-reserve cotton remained relatively stable, and the cost of newly harvester cotton for ginning was high, reaching 18,000yuan/mt or even 19,000yuan/mt. The gap between strong cotton prices and weak yarn prices resulted in substantial losses for yarn mills. According to tteb.com, mainland spinners incurred losses of around 2,500yuan/mt, leading to a sustained decrease in production enthusiasm. Consequently, the industry saw an increase in production cuts and shutdowns.

The underperformance of cotton yarn market can be attributed to three primary reasons. Firstly, there was a decrease in actual demand from downstream sectors, with limited domestic and export orders. Secondly, cotton yarn was replaced by alternative fibers, such as CVC and imitation cotton filament substituting traditional cotton yarn 32S in products like hoodies. Thirdly, overly optimistic price expectations led to premature consumption of both speculative and actual demand.

Looking ahead, cotton yarn prices are likely to fall rather than rise, given the insufficient downstream orders and elevated inventory levels.