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Insight | Time: Sep 13 2018 10:37AM
Imported cotton yarn has a different story in peak season
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Underselling has come.

Upstream and downstream of cotton yarn both hold bullish anticipation to the “golden September and silver October” since entering Sep. However, it is disappointing that the peak season does not come as expected. According to market players, downstream demand for both Chinese and imported cotton yarn goes slack in Sep and the sales even move more slowly than Aug.

From last Friday, underselling started to be seen in imported cotton yarn market due to high inventory, expiry of LC and cost slump of forward imported cotton yarn. Traders have to sell out the spot cotton yarn during Sep to early Oct. The price declines by 300-500yuan/mt in this round of underselling with that in North China moving down less and in Guandong, Jiangsu and Zhejiang more.

Variety Before price reduction (yuan/mt) After price reduction (yuan/mt) Change (yuan/mt)
Vietnamese carded 32S contamination free 25,500 24,800-25,000 500-700
Vietnamese carded 32S contamination controlled 25,000-25,200 24,700-24,800 200-500
Indian carded 32S for air-jet 24,300-24,400 24,100-24,200 200-300
Indian combed 21S 25,000 24,700-24,800 200-300
Pakistani siro-spun carded 10S 21,000 20,600-20,700 300-400

Bearish market in bullish season

After price of imported cotton yarn was revised down, sales did not improve much, mainly owing to weak downstream demand. According to CCFGroup, in the same period of last year, inventory of grey fabric slid obviously, but in Sep this year, the inventory fell slowly and stayed higher than that in last year. Currently fabric plants and grey fabric traders both hold stockpiles, but the orders performed poor. Some downstream players predicted that the peak season this year will not last long and may finish quickly.

Theoretical profits of cotton grey fabric (47”) went negative as the price struggled to move up yet failed. In terms of printing and dyeing, downstream plants fear for taking orders and breaching contracts. Thus, export orders are affected.

Market forecast

In spot market, imported cotton yarn shows price edge against domestic one amid underselling of the former and stable price of the latter. Although downstream has not seen bullish signs, imported cotton yarn wins more attention from downstream fabric plants by lowering price and its sales turn better obviously compared with last week. Eyes are suggest to sales of traders. Inventory of imported cotton yarn is expected to decline and downstream acceptability will decide the price decrement.

In forward market, traders have to order after recouping funds, which is favorable to transactions of forward imported cotton yarn. On the other hand, price decline in spot market reversed the price spread between forward and spot products to negative side, affecting ordering mood. Large traders may force price down further when ordering.

On macro level, the trade war still influences trade of imported cotton yarn from exchange rate, downstream export orders and sentiment. It is worth paying attention to the implement of US tariffs on $200 billion worth of Chinese goods and its impacts on price spread of spot and forward imported cotton yarn and exchange rate.

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