SunSirs: Cotton Prices Fell, and Yarn Mill Inventories Rose

This week, the weekly average price of cotton declined slightly compared to the previous week. Concurrently, yarn mills demonstrated an increased willingness to replenish their inventories; coupled with a decrease in mill operating rates—which reduced raw material consumption—raw material stocks held by domestic pure cotton yarn enterprises have risen. According to statistics, as of April 9, the raw material inventory held by domestic pure cotton yarn enterprises stood at 30.23 days' supply, representing a month-on-month increase of 0.76%.

Analysis and Commentary

Cotton

The weekly average price of cotton has declined. A decrease in the operating rates of spinning mills has led to reduced raw material consumption; while this coincides with an increased willingness among enterprises to replenish their inventories, overall demand remains weak, resulting in a rise in stock levels. These factors exert downward pressure on cotton spot prices, as sluggish demand is likely to stifle any potential price rebound. When combined with futures market data—specifically, the settlement price of the Zhengzhou Commodity Exchange's 2609 contract standing at 15,335 RMB/ton (a week-on-week change of +35.00), alongside changes in trading volume and open interest that indicate heightened market volatility—short-term supply-demand imbalances are likely to exacerbate the downside risks for futures prices, pointing to a distinct bearish trend in the medium term.

Cotton Yarn

Raw material inventories at spinning mills rose by 0.76% month-on-month to cover 30.23 days of production. This increase was driven by a decline in operating rates—which reduced raw material consumption—suggesting either an oversupply of cotton yarn or insufficient demand; this constitutes a bearish signal for spot market prices. The accumulation of inventory is likely to cap any potential upside in prices. When viewed in conjunction with futures market data—specifically, the settlement price of the Zhengzhou Commodity Exchange's 2605 contract, which stood at 21,660 RMB/ton (up 100.00 RMB/ton month-on-month), yet showed limited market activity based on changes in open interest—futures prices are likely to face short-term downward pressure, with weak demand further reinforcing this bearish trend.

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