China’s Demand For Cotton Yarn Improves, For Now

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Recently, China’s cotton yarn market showed some sign of improvement, but prices stayed stable to weak. Most cotton yarn mills put a priority on selling.

According to a survey conducted by China’s CCFGroup on inventory and orders of cotton yarn mills from mid-August inventory of some yarn varieties have come down effectively, mills’ order positions are improving, and the operating rate is expected to recover.

Orders recover slightly
According to the survey, the orders turned better recently. In Guangdong and Shaoxing, orders of some varieties have increased. But under the severe economic environment, both domestic and overseas markets are bearish. Many cotton yarn mills reported that most orders were small yet a bit more frequent.

They took orders with thin profits mainly for keeping operating rate and regular customers. Some medium and large-sized mills described that they had standing orders for special varieties which brought them survival room, but their profits also turned much worse than past years.

Inventory differs among regions
Destocking by lowering prices from June has brought results. In terms of different varieties, carded cotton yarn sold well and the inventory is less than 10 days in general.

Some even have no stocks. However, sales of open-end, combed and high-count ones are stagnated and their inventory is high with open-end one at about one month and combed and high-count one at about 1-2 months.

Operating rate is expected to recover
July was the traditional slack season for textile and apparel. Under high inventory, stagnated cash flow and scarce orders, cotton yarn mills had to cut or suspend production and take holidays to lower the operational pressure. As a result, operating rate decreased to year’s low. However, with “Golden September & Silver October” coming, the operating rate is expected to recover.

In conclusion, as traditional peak season comes, downstream rigid demand may show up gradually and cotton yarn mills are likely to embrace short prosperity. But due to the potential uncertainties, cotton yarn destocking will continue and the peak season may not see “peak”.

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