Forward Cotton Yarn Price Still Hard To Slump In Short Term

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Forward Cotton Yarn Price Still Hard To Slump In Short Term

Shanghai Yarn Expo ended recently, with very little forward trading of cotton yarn. Current forward cotton yarn price under RMB basis is largely around 1,000 yuan/mt higher than the spot goods in China, and the disparity is around 2,500 yuan/mt for Indian carded 32s. Market players pay much attention to Xinjiang-origin cotton yarn, and some Chinese traders of imported cotton yarn are now shifting focus to trading in Chinese made yarn. How China's cotton and cotton yarn price will fare is of concern both overseas and domestically. Here are some factors to consider:

Indian cotton and cotton yarn price forecast

Price of Indian cotton is hard to decline in short run with slow arrivals of seed cotton, moderate local demand and high international cotton price, more likely to be hemmed into a tight range. It is reported that daily seed cotton arrivals have slowed recently in India. With weaker influence of demonetisation, local trading of Indian cotton is tolerable with more cash. Besides, good export shipment of US cotton is supportive to international cotton price, which further supports Indian cotton price.

Indian cotton yarn price is expected to remain high. Actually, moderate local demand and high cotton price is supportive to current Indian cotton yarn price, but spinners may witness inventory burden if export of cotton yarn to China remains lacklustre as local demand is limited after all, and spinners may be forced to cut price. So, the market will closely follow changes in Indian cotton prices.

Chinese cotton and cotton yarn price trend

Price of Chinese cotton is largely stable recently despite falling trading price and trading volume of reserved cotton. Prices will not surge with huge cotton stocks still in the reserves. With more reserved cotton delivered to spinners, cotton yarn plants that produce low-count cotton yarn will see lower cotton cost, which may weigh on new cotton with corresponding quality on the market. Therefore, price of cotton with inferior quality is expected to dip, while that of quality cotton is anticipated to be steady. Price of Chinese cotton yarn is likely to be range bound on the whole and current cotton yarn market is mixed with bears and bulls. Downstream buyers show stronger looking-on mindset with decreasing trading of reserved cotton, and try to dampen cotton yarn price as cotton cost will decline when spinners gradually increase consumption of reserved cotton. But cotton yarn stocks remain low although it has increased recently. Downstream weavers witness moderate orders now, which can last for around 1-2 months, needing to restock. Therefore, demand for cotton yarn is expected to improve in traditional peak season (March and April). Besides, high ordering cost for imported cotton yarn is supportive to Chinese cotton yarn price too.

Vietnamese and Pakistani cotton yarn price trend

Price of Vietnamese cotton yarn is also hard to decline in the short run with high US cotton price, more likely to be largely consistent with Indian cotton yarn price. Transactions of Vietnamese open-end cotton yarn and cotton ply yarn are relatively better than other varieties. Price of Pakistani siro-spun cotton yarn is supposed to be weak in short run with decreasing demand from Chinese market, and that of Pakistani ring-spun cotton yarn may be moderate, enjoying certain price advantage compared with Indian ring-spun ones. Downside potential of Pakistani cotton yarn will be limited under losses. Stable cotton price in Pakistan supports cotton yarn price too.

In short, forward cotton yarn price may not slump in short run, and cotton price is critical to later cotton yarn price trend.