China’s Cotton Yarn Market Picks Up

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Cotton Yarn Market To Pick Up

Entering December, China’s cotton yarn market has weakened slightly, but the sales still move smoothly. The market performs better than expected. In the whole year, trading of cotton yarn has been good since September improvement, despite the lackluster in May-August. The market performance in Q4 is also better than the same period of last year.

Currently, open-end cotton yarn is sold well except for OEC20-21S. Among high-count cotton yarn, compact-spun combed 50-80S are sold smoothly, especially compact-spun combed 60S even sees supply shortage, while the sales of 100S or higher-count ones containing long staple cotton and high-count ply yarns keep slack. Conventional cotton yarn price declines about 200yuan/mt. However, the inventory of carded cotton yarn mills does not accumulate and the sales keep smooth; while combed cotton yarn experiences more decrease of 300-500yuan/mt. As mentioned above, the varieties with moderate sales are more than those with poor sales.?

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From the inventory comparison in recent three years, current inventory of cotton yarn mills is far lower than that in last year. It is inching up at slow speed and may not increase obviously by end-Dec.

In Q4, cotton yarn market has not been hot, but after months’ low, it is surprising. China and the US agreed on a text of phase one economy and trade agreement, and the US would fulfill its commitment to cancel the additional tariffs on Chinese commodities by phases. The additional tariffs on Chinese goods worth US$ 180 billion to be imposed on December 15 were canceled, the 25% tariffs on Chinese goods worth US$ 250 billion sustained, and 15% tariffs on Chinese goods worth US$ 120 billion declined to 7.5%. Amid improved China-US relations, market sentiment changes subtly. Cotton yarn mills are more optimistic and think cotton yarn market will be better in 2020 than in 2019. However, with trade negotiations still on, market participants are operating cautiously. They mostly purchase based on demand and sell according to the market situation.

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Downstream orders are divergent
Large weavers reported adequate and better orders while small and medium weavers reported poor orders and some of them planned to take holidays in advance. Overall, the orders may turn slightly better later. In terms of downstream procurement, weavers kept buying for immediate production in order to run with low inventory due to tight capacity and lack of confidence to later market. As for traders, their inventory is low and they may restock more amid better expectation to later market.

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Therefore, the macro environment and downstream orders both indicate larger possibilities that cotton yarn market will continue to keep stable or turn better slightly from late December to early January. The cotton yarn price will be stable. As the plants and logistics take holidays successively, the trading will weaken. The post-holiday market is uncertain, but if downstream orders sustain improving and cotton yarn mills, weavers and traders all run with low inventory, the price may increase.

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