Imported cotton yarn arrivals to China assessment
Imported cotton yarn arrivals to China in April 2020 are estimated at 132kt, down 27.07% y-o-y and 27.47% m-o-m. Of the total arrivals, there was a large amount of cargos which had been ordered before Spring Festival, and a part of cargos which were delayed to deliver from February. The data above considered the breach of contracts. Without considering that, April arrivals would be 163kt, down 9.9% y-o-y and 10.44% m-o-m.
According to foreign shipment data in March and considering the breach of contracts, arrivals of Vietnamese cotton yarn are estimated at 60kt; that of Indian cotton yarn at 30kt; Pakistani cotton yarn 21kt, Uzbekistani cotton yarn at 6kt; Indonesian cotton yarn at 4kt, and that of other regions and countries at 11kt. The breach of contracts was little seen in history, so the result of research may show large differences. The breach of the contracts may be beyond expected.
Without considering the breach, April arrivals of imported cotton yarn from Vietnam would be 62.7kt, from India would be 53.9kt, from Pakistan 23.6kt, from Uzbekistan 7kt and from other countries and regions 11.5kt.
Major traders and L/C issuing companies expected less arrivals of imported cotton yarn in April. Imported yarn stocks and supply and demand outlook in May
In terms of supply, April arrivals of imported cotton yarn are estimated at about 132kt at a normal level. The stocks in the ports stayed high as the sales were poor in April, and the pressure on traders sustained. Due to L/C issues, pressure on traders continued to increase, so the price of imported cotton yarn is predicted to weaken and underselling may appear.?
Looking from demand, operating rate of fabric mills recovered somewhat after Tomb Sweeping Day holiday (Apr 4-6), but later, it reduced. The run rate in North China seemed improved. That in Weifang, Shandong, representative of weaving bases, reached over 70%. It started to tick down in Jiangsu and Zhejiang. In Nantong and Lanxi it remained at 40% and in Changzhou it was at 30%. Especially from mid-Apr, it declined from 40-50% to 20-30% in Foshan. Before and after May Day holiday, the operating rate of fabric mills nationwide has declined about 30%. In short run, it may be hard to recover to over 50%.
As for later market, the supply will mainly come from the 230kt stocks in the ports and 30-day inventory of foreign cotton yarn in Vietnam, India and Pakistan.
Arrivals of imported cotton yarn may reduce later, but it is noteworthy that the export companies in India and Pakistan recover well, and as the consumption in their local markets has not restored, they focus on export. The proportion of Indian cotton yarn and Pakistani cotton yarn exported to China increases, which may provide support for the imported volume of China.
As for the demand, it is still restrained by the pandemic. The control across the world is difficult and it may spread for one to two years. The possibility of the outbreak of economic crisis keeps increasing. The companies are advised to prepare for it.