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Insight | Time: Aug 21 2019 3:14PM
Survey on inventory, operating rate and orders of cotton yarn mills
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Recently, cotton yarn market partly improves, but the price stays stable to weak. Most cotton yarn mills put a priority on selling. CCFGroup started a survey on inventory and orders of cotton yarn mills from mid-Aug and the results are partly shown as follows. From the table below, it can be seen that the inventory of some varieties has reduced effectively, the orders turn better slightly and in the meantime, the operating rate is expected to recover. Market players still hold anticipation to the coming peak season in Sep and Oct to some extent.

Survey date Region Scale (spindle) Main products Inventory Operating rate Order status
12-Aug One mill in Shandong 100,000 Conventional cotton yarn for knitting 10-20 days 50% A few
12-Aug One in Hebei 50,000 Combed 60S, Semi-combed 40S, combed 32S Two months 50% Poor
12-Aug One in Henan 60,000 Combed 32/40S Over one month 0% No order
13-Aug Two in Hebei 200,000 Combed 40S, combed 60S, combed 80S containing long staple cotton One month 100% Scheduled to Sept
13-Aug Three in Hebei 100,000 Compact-spun combed 40S, combed 50S, combed 60S Very low 100% Good
13-Aug One in Shaanxi 100,000 High-count cotton yarn 60 days 100% Poor
15-Aug Two in Shandong 200,000 Ring-spun & compact siro-spun 21-40S Normal 100% Moderate, but weaker than previous years
15-Aug Three in Shandong 80,000 Ring-spun carded 32/40S & compact-spun combed 40/50/60S About 7 days 100% Moderate
15-Aug Two in Henan 50,000 Carded 32S, carded 40S Very low 100% Moderate
16-Aug One in Hubei 100,000 Combed 32/40S, open-end 60 days 50% Not good
16-Aug Three in Henan 80,000 Compact-spun carded 32/40S 7 days 80% Improved
16-Aug One in Hunan 450,000 Carded 10S for denim, coarse yarn Over 20 days 80% Improved in recent one month
19-Aug Four in Shandong 80,000 Compact-spun combed 40S, combed 50S, combed 60S Over one month 100% Improved
19-Aug Five in Shandong 8 sets Open-end cotton yarn One month 30% All small orders
19-Aug Six in Shandong 150,000 Compact-spun combed 60S Over one month 100% Not improved

Orders recover slightly: According to the survey, the orders turn better recently. In Guangdong and Shaoxing, orders of some varieties are heard to increase. 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 Jun has brought fruits. In terms of different varieties, carded cotton yarn is 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: Jul 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, the operating rate decreased to year’s low. However, with “Golden Sept and Silver Oct” coming, the mills which took holidays before restart gradually, thus 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”.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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