Price trend

According to the SunSirs commodity market analysis system, cotton yarn market activity rebounds this week, with prices declining slightly. Textile industry sentiment gradually stabilized and improved as the Zhengzhou Cotton CF2601 contract returned above the 14,000 RMB/ton mark and anticipation of incoming domestic sales orders for the "Golden September and Silver October" period emerged. As of August 22, the spot price of 21S cotton ring-spun yarn in Shandong Province is around 22,066 RMB/ton, down 100 RMB/ton from the previous week. The spot price of 32S cotton ring-spun yarn is around 23,550 RMB/ton, down 50 RMB/ton from the previous week.

Analysis review

Cotton yarn prices sees a slight decrease this week, reflecting a markedly mixed response from the recent textile market. On the one hand, some textile companies reported a slight increase in orders, leading to a slight price increase. On the other hand, most companies reported seeing no signs of the approaching peak season, with downstream demand remaining weak and pressure from high finished product inventories persisting, leading to increased discounts. Overall, the cotton yarn market has yet to establish a unified trend. Futures prices are fluctuating and stabilizing, influenced by sentiment and expectations, while spot prices are driven by actual supply and demand, with a prevailing wait-and-see attitude. In the short term, yarn companies are unlikely to change their quotes, and yarn prices are expected to remain stable.

Operating Status: This week, mainland textile companies maintain some anticipation for the upcoming peak season. While some previously idled plants have resumed production, these operations remain unprofitable. Mainland China's operating rate is currently 50%-60%, with Xinjiang maintaining around 90%. As of August 21st, textile companies in major regions were operating at 65.8%, a 0.46% increase from the previous month, representing a slight increase in the operating rate.

Inventory: Yarn inventories decline slightly this week, but remain elevated year-over-year. Some downstream markets purchased in small quantities, and air-spinning saw a slight improvement in sales. Inventories in Xinjiang declined significantly, with large mills in Xinjiang holding approximately 35 days' worth of yarn, while those in mainland China held around 15-20 days' worth. As of August 21, yarn inventories at textile mills in major regions stood at 31.5 days' worth, a 1.25% decrease from the previous month.

Cost side: Zhengzhou cotton fluctuates and runs weak this week. The market still lacks clear news guidance. The news that the Federal Reserve will not cut interest rates is bearish for market sentiment. The strong supply expectation of new cotton and the weak demand are still the main contradictions. It is expected that cotton will fluctuate in the short term.

Increased Demand: Recently, there has been a slight improvement in end-user demand, with increased demand for essential goods replenishment. Weaving machine operating rates have rebounded from low levels, easing bearish market sentiment. However, downstream manufacturers remain cautious about quality during the upcoming peak season. Overall textile market operating rates have entered an upward trend, with weaving machine operating rates rising by 4 percentage points to 63% and texturizing machine operating rates increasing by 2 percentage points to 72%. Operating rates are expected to continue to rise slowly in the future.

Market outlook

The cotton textile industry is currently in its off-season, a period expected to persist. Orders for the autumn and winter seasons have yet to begin to arrive, with no clear signs of a restart in the near term. Capacity expansion efforts are still underway at some textile companies in Xinjiang, maintaining ample supply in the market. In the short term, it's unlikely that downstream orders will see significant growth.

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