Spun yarn prices have stopped falling in China after cotton and polyester prices have begun bottoming out a few days ago. Production levels have sharply fallen amid rising inventories, however, with nearly all spinning mills currently losing money.
Spun yarn prices have stabilized in China after sharply declining over the previous fall of fiber prices.
With cotton and polyester prices bottoming out in the last 10 days, spun yarn prices have eventually stopped dropping in the meantime.
Demand has been extremely weak in the past period, due to negative anticipations whereas domestic apparel sales were slowing down and clothing exports were sharply falling.
With the G8 summit looming, anticipations have been reversed and demand has begun strengthening.
Yarn prices have not yet bottomed out, however, and margins have further plunged in negative territory at spinning mills.
Most yarn producers are losing money, except for those focusing on lower counts who have been able purchasing cheaper cotton from state reserves.
Operating rates have been slashed at many mills with smallest factories shutting down their doors.
Inventories are still at a relatively high level at weaving plants, meaning that demand for yarns should not rebound over the short term.
Fiber and yarn prices could even fall to lower levels in case US-China negotiations would abort later this week.
As a clear sign that pessimism could prevail, cotton futures have failed to rise in the past days.