SunSirs: The Price of Cotton Yarn Was Upward Boosted by Cost

Price trend

According to the business data analysis system of SunSirs, the cotton market experienced significant fluctuations this week. Driven by rising costs, textile companies continued to increase their quotations, with spot prices for cotton yarn rising by approximately 200-400 RMB/ton. As of January 9th, the reference spot price for 21S cotton ring-spun yarn in Shandong province was around 22,250 RMB/ton, an increase of 0.91% compared to last week; the reference spot price for 32S cotton ring-spun yarn was around 23,600 RMB/ton, an increase of 1.07% compared to last week.

Market analysis

Cotton prices have risen sharply, putting pressure on textile companies' costs. This week, cotton yarn prices continued to increase, with quoted prices rising by approximately 200-400 RMB/ton. However, downstream buyers are adopting a wait-and-see attitude, resulting in limited actual transactions. A divergence in demand is evident across different yarn types, with demand for medium-to-high count cotton yarn showing improvement. Textile companies have limited new orders and are mainly processing existing orders, with production levels remaining largely stable.

Operating conditions: This week, yarn prices increased significantly, and yarn sales slowed down. Textile companies mainly focused on processing previous orders, and there was little change in operating rates. Operating rates in inland areas were 50-60%, while operating rates in Xinjiang remained stable at over 90%. As of January 8th, the operating load of textile enterprises in mainstream regions was 64.7%, which was unchanged from the previous week.

Inventory Situation: Yarn prices continued to rise this week, but downstream acceptance was limited, resulting in reduced transaction volume. Inventories in mainland China increased slightly, with finished yarn inventories in Xinjiang at approximately 35-40 days and mainland enterprises holding inventories of around 20-25 days. As of January 8th, the average yarn inventory for textile enterprises in major regions was 32.6 days, a weekly increase of 0.93%.

Cost side: The cotton market experienced wide fluctuations this week, with domestic cotton continuing to outperform international cotton. The market strengthened due to strong expectations of a reduction in cotton planting area; however, cost pressures on downstream textile companies weighed on market performance, resulting in relatively weak trading activity and a noticeable delay in textile companies' willingness to replenish their inventories. The cotton market is expected to undergo range-bound adjustments in the near future, and attention should be paid to upcoming cotton industry-related meetings and policy adjustments.

Demand side: the fabric market continues to show weakness and differentiation. Weaving mills mainly receive small and short-term orders, with the overall operating rate of the industry at around 40%. Product inventory remains high, and while raw material prices are relatively strong, grey fabric prices have remained largely stable. According to statistics, as of January 8th, the average operating rate of the domestic cotton textile industry was 39.56%, a decrease of 1.49% compared to the previous period.

Market outlook

Currently, downstream weaving mills have insufficient orders, leading to a wait-and-see attitude towards current yarn prices. Yarn sales are slow, but production remains stable, resulting in increased inventory pressure. It is expected that cotton yarn manufacturers may lower prices to secure deals, and cotton yarn prices are likely to continue fluctuating in line with cotton prices.

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