Price trend

According to the SunSirs commodity market analysis system, cotton yarn prices remained relatively weak this week, with no significant fluctuations. As of September 12, the spot price of 21S cotton ring-spun yarn in Shandong Province was around 22,066 RMB/ton, unchanged from the previous week; the spot price of 32S cotton ring-spun yarn was around 23,550 RMB/ton, also unchanged from the previous week.

Analysis review

Market Overview: Despite entering the traditional peak season, actual market consumption is recovering slowly, with prices fluctuating. Some textile companies are able to sell goods by lowering prices, but this is unprofitable, while others are holding prices high, directly impacting sales volume. Overall market demand is significantly below expectations, failing to demonstrate the expected peak season activity and remaining weak overall. While textile plant operations have seen a slight recovery, the recovery is slow, leading to a cautious wait-and-see attitude in the market. If consumption continues to show no significant signs of recovery, cotton yarn prices are unlikely to rise.

Operating conditions: With the arrival of the traditional peak season, downstream orders have increased slightly, leading to a slight increase in mainland textile mill operating rates. However, overall operating rates remain low, with 50% to 60% of mainland mills operating, and around 90% operating in Xinjiang. As of September 11, textile mills in major regions were operating at 66.5%, a 0.76% increase from the previous month, representing a slight rebound in the operating rate.

Inventory: Yarn inventories continued to decline slightly this week, but remain relatively high year-over-year. Limited new orders from downstream markets have hindered yarn procurement. Large mills in Xinjiang maintain inventories of approximately 35 days' supply, while mainland enterprises maintain inventories of around 15-20 days' supply. As of September 11, yarn inventories at textile mills in major regions stood at 30.6 days' supply, a 1.29% decrease from the previous month.

Declining Costs: Zhengzhou cotton prices saw a volatile decline this week, lacking positive market support as the market awaits the USDA supply and demand report. In the spot market, hand-picked cotton wadding has begun to increase in southern Xinjiang, and seed cotton purchases are imminent. Purchases in mainland China's Shandong, Hubei, and Hebei provinces have increased, fueling expectations of a bumper new cotton crop. While downstream orders have recovered, the increase has fallen short of expectations, leading to weak and volatile cotton markets in the short term.

Increased demand: The market pins its expectations for the peak season on the domestic demand market. With the issuance of a new round of consumer coupons and the start of stocking for autumn and winter products, transactions in the textile market have improved. There are queues for some varieties, and shipments are mainly coarse and thick varieties, which basically have foreign cotton traceability requirements. Conventional coarse and thick grey cloth products are shipped faster, and the overall market orders are still average.

Market outlook

The impact of factors such as the current arrival of new cotton and weather on cotton supply and prices will also indirectly impact the cotton yarn market, exacerbating market uncertainty. In the short term, the cotton yarn market is likely to remain weak and stable, but a substantial recovery in the long term will require attention to factors such as the recovery of end-use consumption, policy guidance, and changes in the international market.

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