Cotton yarn import prices have declined in yuan terms in China, whatever their rise in dollar terms. Allocation of additional cotton import quotas should however support domestic spinners. Our weekly report covers the China yarn domestic and import market indicators, as well as local market prices in Qianqing and Shaoxing (Zhejiang).
Yarn prices have stayed stable on China’s domestic market, in line with an unusual lack of activity in this period of the year.
Cotton yarn prices are supported by firm raw material costs, with a rise of cotton futures in Zhengzhou offering reasons for not lowering yarn prices.
Official sales from state reserves have not resumed and stocks from previous years have been digested at spinning mills.
On the other hand, additional import quotas of 800,000 metric tons have been officially announced and reserved for domestic spinners only.
Raw material costs of yarn producers should therefore drop, as foreign cotton is cheaper than domestic fibers.
International cotton prices have however risen in the past weeks, therefore reducing the price difference with domestic cotton prices.
Chinese spinners are before all confronted with competition from foreign cotton yarns, especially from Vietnam where Chinese yarn production is being relocated.
Cotton yarn import prices have risen in dollar terms, however falling in yuan terms after taking into account a 3% decline of the VAT as of April 1st, from 16% down to 13%.
Cotton yarn imports could therefore remain strong from Vietnam, India and Pakistan.
The rise of the Indian rupee should however limit Indian export sales to China, with Indian spinners also confronted with a sharp rebound of cotton prices on their domestic market.
Source: Emergingtextiles
