Business

How China's Cotton Spinners React To Soaring Cotton Prices

Cotton yarn prices have surged recently, but actual trading is hard to chase up when downstream market witnesses inadequate orders, tight capital and certain losses, say Chinese cotton traders. Most market players are diffident about market trends. A brief survey was conducted to assess sentiments on cotton stock, price increment and sales in cotton yarn mills.

Based on the survey, the following conclusions can be made:

1. Cotton stocks are insufficient. Most of the cotton mills are holding cotton stocks of a month, in anticipation of increasing cotton prices. Besides, sales of reserved cotton will finish by the end of August, and the new cotton will not intensively arrive until end-September. At that time, cotton yarn mills have to buy cotton from traders, but they prefer to hoard up cotton now by purchasing more reserved cotton. The delivery of reserved cotton is slow, bothering cotton yarn mills, which is a key reason for plunging cotton futures but firm spot cotton price.

2. Offers for cotton yarn are largely revised up by around 500-1,000yuan/mt, but downstream weavers are still cautious in restocking with dull orders, and mixed cotton market. Trading volume of cotton yarn has reduced in recent days. Downstream weavers increased hoarding up cotton yarn before cotton price hiked, but reduced purchasing volume later.

3. Cotton yarn mills still expect yarn price to rise later despite muted sales now. Cotton price is hard to drop when reserved cotton sales volume does not increase. Some cotton yarn mills think peak season may come earlier this year although there is still one month to move traditionally.