Business

Will Cotton Yarn Market Welcome Turning Point In May?

In mid-March, export orders, especially those from Europe and the US, which had been taken by end-user plants were canceled intensively, leading to sharp fall of cotton yarn market with price dropping and inventory accumulating quickly. But entering April, though cotton yarn market sustains previous weakness, some differences are seen. Orders improve in some regions amid overall weakness The first half of the year is traditionally peak season for China's textile industry. However, cotton yarn market was sluggish due to the pandemic. Even so, the market was not as bearish as expected in March. It is learnt that downstream plants received a large amount of cotton gauze mask orders from Japan and the production could sustain to end-April, which promoted the procurement of cotton yarn like carded 40S. On the other hand, orders from China local market also improved, but mainly carded 32-40S. However, open-end cotton yarn, high-count cotton yarn and combed cotton yarn remained dull and the inventory kept rising. As a whole, cotton yarn market has not deteriorated further in April. The overall inventory is still in uptrend, but the increase slows down compared with that in mid- to late March. As for operating rate, some cotton yarn mills have reduced production under the rise of inventory, but it is not seen at large. Overall run rate of cotton yarn mills has moved down slightly. Cotton yarn price falls at a slower speed Cotton yarn price is still in downtrend, but the decrease slowed down in April compared with mid- to late March. Some products like carded 40S remained stable in April, while other products are still sold with discounts and some large mills are also underselling. Conventional cotton yarn declined 1,000-1,500 yuan/mt cumulatively in mid- to late March, and 0-500yuan/mt in April. High count cotton yarn like compact-spun combed 60S decreased 1,500-2,000 yuan/mt in mid- to late March and 0-500 yuan/mt in April. Cotton yarn price fall was arrested in April mainly due to rebound of cotton prices, and some downstream orders that mills received. Actual profit of cotton yarn restores gradually Previously, spot profit of cotton yarn mills seemed good, but with high-priced cotton stockpiles, the actual profit was thin and most mills suffered losses under one-month cotton inventory. Cotton yarn price decline slowed in April, and the high-priced cotton stockpiles were consumed, thus the actual profit of cotton yarn mills was restored gradually. According to CCFGroup, cotton yarn mills can reach breakeven or enjoy slight profit at present. How will China's cotton yarn market develop? Firstly, affected by the pandemic outside China, cotton yarn producers such as India, Vietnam and Pakistan are seriously hit. Cotton yarn imports may reduce largely, which is favorable to the sales of Chinese low to medium-count cotton yarn. The stocks of imported cotton yarn in China are high at present. Secondly, according to foreign media, Europe and the US will lift the lockdown gradually from May. Amid the suspension of production in Southeast Asian countries, orders to China may improve. However, it is just a possibility, and finally it will depend on the control of the pandemic and recovery of economic activity. According to CCFGroup, downstream orders have not shown signs of improvement. The orders from China local market may reduce in May, and the orders of masks will also slow down. Many weavers plan to take holidays or reduce production in May. If the pandemic outside China does not get controlled and the orders do not recover, cotton yarn sales and price will have a larger possibility to move down and cotton yarn mills will cut or suspend production.