Looking ahead to September, from a macro perspective, there are no significant macro benefits in September, and the spot cotton transactions are limited, which may lead to a decline in prices. At the same time, from a seasonal perspective, the off-season impact continues in September, and the enthusiasm of spinning enterprises for production is expected to be low in the middle and early parts of the month. However, as the traditional peak season of "Golden September and Silver October" approaches in the latter part of September, demand is expected to gradually recover.

In July, domestic cotton yarn prices increased significantly due to the obvious rise in cotton prices. Looking forward to September, since the cotton textile market is still in a off-season for a long time, and the spinning enterprises' inventory continues to rise, the supply pressure is relatively large. In this context, it is expected that cotton yarn prices may fall slightly in September.

Cost-driven rise in cotton yarn prices

Although the cotton spinning industry chain is not very prosperous, the price of cotton has increased significantly, which has led to a slight increase in the price of cotton yarn in July. According to the monitoring of Zhuoc创Information, as of the end of July, the spot monthly average price of cotton in China was about 14,741 RMB/ton, up 3.41% from the previous month and down 3.91% year-on-year. During the same period, the national general-purpose high-configuration 32-count pure cotton yarn monthly average price was about 21,430 RMB/ton, up 2.29% from the previous month and down 2.07% year-on-year.

But from the market reaction, as the cost center of cotton yarn is lifted, cotton spinning enterprises are cautious about the high price purchase. Specifically, from the fundamental面, due to the fact that the market is in the off-season of demand in July, and the continuous high temperature weather in the inland, the number of spinning enterprises that restrict production and holiday is increasing. At the same time, the downstream fabric factory's raw cloth inventory is increasing, the speed of inventory reduction is slow, the raw material purchase is cautious, the main demand is to replenish the goods, and the orders of spinning enterprises are less. In addition, from the supply side, the cotton yarn inventory of spinning enterprises is high, and the supply performance is loose.

From a profit perspective, as of the end of July, the theoretical monthly gross profit for pure cotton ring-spun high-grade 32s cotton yarn was -720.35 RMB/ton, a decrease of 50.15 RMB/ton compared to the previous month's average. This reflects that although cotton and cotton yarn prices rose in July, the increase in cotton yarn was not as much as cotton, and the cost pressure was relatively high, leading to an expansion of the theoretical immediate processing profit loss for cotton spinning enterprises.

From the start-up situation, the start-up load of the national cotton spinning enterprises in July was 61.20%, down 0.75 percentage points from the previous month.

Reflecting in stockpiles, the average number of days for pure cotton yarn inventory in large-scale cotton spinning enterprises above the designated scale was 30 days in July, an increase of 11.11% from the previous month; the average number of days for pure cotton gray fabric finished inventory in large-scale weaving mills was 42 days, an increase of 31.25% from the previous month. In July, downstream weaving enterprises had fewer orders, and the enthusiasm of weaving mills to purchase cotton yarn was mixed. The sales of cotton yarn in spinning enterprises were not fast, and the inventory increased.

The price of cotton yarn in September may fluctuate and decline, but the expected range is expected to be small.

Looking ahead to September, from a macro perspective, there are no significant macro benefits in September, and the spot cotton transactions are limited, prices may decline. At the same time, from a seasonal perspective, the off-season impact continues in September, and the enthusiasm of spinning enterprises for production is expected to be low in the middle and early parts of the month.

But as we enter late September, with the traditional busy season of "Golden September and Silver October" approaching, demand is expected to gradually recover, and some downstream enterprises may start stockpiling in advance. As a result, the orders of spinning enterprises are expected to increase, and therefore, the production load of enterprises is expected to start rising.

Overall, it is expected that cotton yarn inventories of spinning mills will increase in September, and the supply side will be loose; on the demand side, the downstream fabric mills are not actively producing, and the stock of gray fabric is high, and spinning mills are cautious in purchasing cotton yarn, and orders may not be many.

From the raw material side, the cotton market is gradually returning to the fundamentals: downstream textile enterprises have limited orders, spinning enterprises have poor profits, which may suppress cotton demand, and at the same time, the expectation of increased cotton production in the new season is strong, so it is expected that cotton prices in September may fall, and the support from the cost side is weakened, which is bearish for the spot price of cotton yarn.

To sum up, it is expected that the domestic cotton yarn price in September may fluctuate downward, and the price may fall by 100 RMB/ton to 21100-21700 RMB/ton. In the later period, close attention should be paid to the follow-up of orders, changes in the macro market, etc.

The risk factors lie in whether the cotton import quota will be issued. If the quota is implemented, there may be a possibility of a price adjustment for cotton. In addition, there are still many uncertainties in the tariff issue, which may affect the market situation.

As an integrated internet platform providing benchmark prices; On September 8th, the benchmark price of 32S cotton yarn by SunSirs was 23,550.00 RMB per ton, remaining the same as at the beginning of this month.

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