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Research | Time:Jun 22 2016 2:00PM
Obvious substitute effect of Chinese cotton yarn to imported cotton yarn?
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There is hot discussion regarding imported cotton yarn demand returning to Chinese yarn this year. Is this really happening? When does it appear obviously? How about the volume and is this sustainable? This research is to analyze above market focuses and we find out that the substitute effect of Chinese cotton yarn to imported cotton yarn was not obvious before Mar 2016 while increased gradually in Apr-May.

However, production of Chinese cotton yarn did not grow much. It was the consumption of inventory that replaced cotton yarn imports. In terms of price spread between Chinese and imported cotton and the orders of imported cotton yarn, higher price of imported cotton yarn than Chinese yarn is expected to sustain in the short run. If selling volume of reserved cotton does not increase, cotton price may remain firm before the preliminary arrivals of 2016/17 cotton, because of which downward space for cotton yarn will be capped even in slack season.

Content (6 pages)
I. Why demand for cotton yarn flows back?
1. Price gap between Chinese and international cotton narrows
2. Price of imported cotton yarn is higher than that of Chinese yarn
3. Arrivals of imported cotton yarn plunge

II. Is there much back-flow of cotton yarn demand?
1. Rising output but falling inventory of Chinese cotton yarn
2. Cotton yarn import and production change
3. Cotton yarn supply and demand balance

III. Is it sustainable for the substitution of Chinese cotton yarn to imported cotton yarn?

Chart 1. Price of domestic and international cotton since 2011
Chart 2. Price of Indian and Chinese cotton yarn 32S
Chart 3. Cotton yarn imports since 2008
Chart 4. Production of cotton yarn and stocks in spinners
Chart 5. Supply and demand of cotton yarn in China since 2015
Chart 6. Price of domestic cotton yarn and cost assessment in early Jul

Figure 1. Cotton yarn imports and production

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