In April, the negative impact of the epidemic continued, the yarn market became increasingly deserted, and the demand for textile and clothing dropped sharply, which was transmitted to the spinning link. Cotton yarn inventories continued to accumulate, and spinning companies faced a test of survival. With the recent sharp fluctuations in the cotton market coming to an end, spinning profits are expected to recover marginally. The difficulty lies in the decline in orders.
Cotton yarn prices continue to fall, and the cost-effectiveness of outer yarns decreases. Affected by the global epidemic, textile and clothing consumption has stagnated, and cotton yarn prices have declined. After late March, the price of domestic cotton yarn accelerated its decline, falling below the price of Vietnamese cotton yarn. According to data from the National Cotton Market Monitoring System, as of April 24, the yarn index CNCottonC32S of the National Cotton Market Monitoring System was 19,165 yuan/ton, down 6.7% from the beginning of March; the average port delivery price of 32-count cotton yarn carded yarn in India and Vietnam 19,827 yuan/ton (including 300 Hong Kong miscellaneous transportation charges), down 3.7% from the beginning of March. At present, the price of domestic cotton yarn is lower than the average price of cotton yarn in India and Vietnam, which is 660 yuan/ton.
Figure 1 Domestic and foreign cotton yarn price trends since 2019
The international cotton yarn market is weak in both production and sales. Affected by the epidemic, European and American textile and apparel orders have dropped sharply. Vietnamese cotton yarn is facing the dilemma of breaking contracts, reducing prices and re-signing contracts. Data from the Vietnamese Ministry of Industry and Trade shows that in April and May, Vietnamese textile and footwear orders will drop by about 70% year-on-year. Vietnam’s largest state-owned garment company, Vietnam National Textile and Garment Group, is considering suspending work for 50,000 employees; India’s cotton yarn exports fell by 64% year-on-year in January and February (Figure 2), of which China decreased by 8%, and India closed down in March After the epidemic, cotton yarn sales and transportation have almost stagnated. Although some textile mills can currently resume production, there are reports that the blockade in some hardest-hit areas in India may be extended again for June. The subsequent situation depends on the Indian government’s blockade plan; Pakistan announced the extension of the nationwide blockade. As of May 9, a few yarn mills began to resume work, but downstream demand has not recovered.
Figure 2 Cumulative monthly export volume of Indian cotton yarn in the past two years
Domestic port imported yarn inventory has increased Go out less often. According to customs statistics, my country imported 280,000 tons of cotton yarn from January to February 2020, a year-on-year decrease of 1.4%. From January to March 2020, my country imported approximately 490,000 tons of cotton yarn, a year-on-year decrease of 0.6%. Since orders for foreign yarn mills are generally placed 2-3 months in advance, and orders from foreign exporters and middlemen are generally placed 1-2 months in advance, actual orders for outer yarns placed in February-March are not many, mainly on December 1 According to the orders in March, the amount of foreign yarn arriving at the port did not decrease significantly in March, and the price of foreign yarn arriving at the port was at a disadvantage. There was more incoming warehouses and less outgoing warehouses, resulting in high import yarn inventories at the port.
Figure 3 my country’s cotton import volume since 2018
Domestic textile factories have accumulated cotton yarn stocks, and companies are competing Price reduction. Under the epidemic situation, foreign trade orders for textiles and clothing have been cancelled, domestic sales have shrunk, and coupled with pressure from export sales to domestic sales, companies have been competing to cut prices to grab limited orders, and even lower prices can not grab orders. According to wind data, the cumulative sales of pure cotton yarn from January to March fell by 27.69% year-on-year. Although the sales decline has improved compared with February, it is still in a negative growth trend, which means that after domestic yarn mills resume work and production, demand will recover slowly, and finished products Inventory accumulation. According to data from the National Cotton Market Monitoring System, in early April, cotton yarn inventory increased by 24.5% year-on-year, significantly higher than the same period in previous years. The current shutdown of enterprises means that they are facing the crisis of bankruptcy and the dilemma of rising inventories of finished products without stopping production. If orders still do not improve in May and cotton yarn inventories continue to accumulate, many enterprises may choose to shut down and reduce production.
Figure 4 Changes in yarn inventory discount days of textile enterprises in the past three years
Figure 5 Domestic sales in the past three years Cumulative year-on-year changes in cotton yarn sales
Spinning profits are expected to recover, and the main difficulty for enterprises is order problems. According to data from the National Cotton Market Monitoring System, as of April 26, the price difference between domestic yarn and cotton was 7,730 yuan/ton (CNCotton C32S-CNCotton B), which is basically the same as the average price difference in the past three years. Theoretically speaking, the profit level of spinning is at a normal level. , but most companies have high-priced cotton stocks in the early stage, and the actual average profits are far from normal levels, or even suffer losses. At present, the decline in cotton yarn prices has slowed down, cotton prices have slightly consolidated, and the sharp changes in the market have temporarily come to an end. In theory, spinning profits are expected to be restored. The main problem currently plaguing spinning companies is the lack of orders. It is not difficult to foresee that in the early stage of market recovery, due to the slow start of downstream demand, high inventory at this stage, and the cancellation of a large number of foreign trade orders, the textile industry will face unprecedented pressure. and huge challenges.
Figure 6 Domestic cotton and cotton yarn price trends since 2019
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