According to feedback from some weaving mills and cotton yarn traders in coastal areas, Indian cotton yarn far-month shipment quotations have continued to decline sharply since late February. The quotations of C32S mid-to-high-end cotton yarns from brands and major manufacturers have fallen below 4.34-4.35 cents/kg from the previous period. 3.90 cents/kg (small yarn mills and small exporters quoted 3.85-3.90 US dollars/kg). In just about half a month, yarn prices fell by more than 10%.
According to industry analysis, domestic cotton prices in India have fallen from highs after the Spring Festival, domestic consumption has rapidly weakened due to obvious “overdraft” in yarn prices (it is reported that the operating rate of weaving mills in southern India has dropped sharply, with some manufacturers falling below 60%), and including China, Buyers such as Bangladesh and Vietnam have slowed down or even suspended inquiries/purchases of Indian cotton yarn (the inversion of cotton yarn in the internal and external market is prominent), the depreciation of the Indian rupee against the US dollar and other factors. Indian yarn shipments in the far month have taken the lead in launching the “price reduction to promote orders” strategy; and Cotton yarn spot and immediate shipments have shown a certain resilience due to the fact that yarn mill orders are generally scheduled to April/May and the prices of cotton/polyester staple fiber and other raw materials are high, and the quotations are stable and weak.
So under the premise that Yuanyue’s cargo quotations have plummeted, should Chinese cloth factories and traders sign large-scale orders for Indian cotton yarn? The author believes that it is still necessary to observe, hold the currency and wait for it, and enter at the dip. The reasons are as follows:
First of all, the decline in orders, shrinking demand, and consumer panic caused by the surge in cotton yarn in India have not yet been fully released. Spot stocks such as S-6/J34/MCU5 continue to oscillate at high levels, and the impact on the industrial chain has not yet reached an “inflection point”; secondly, in March, The probability of raising interest rates by 25 basis points at the Federal Reserve’s interest rate meeting on the 15th and 16th has greatly increased, and India’s domestic cotton planting intentions are expected to increase significantly in 2022 (CAI predicts that the cotton planting area in India’s 10 main cotton producing areas will increase by 20%-25% year-on-year). Indian cotton spot and MCX futures have caused great negative effects; again, from the perspective of quotations, the current import cost of Indian cotton yarn for far-month shipments is basically the same as that of domestic cotton yarn (calculated based on the latest exchange rate), and there is not much cost advantage in procurement; and it needs to be considered In the latter part of the year, Indian cotton yarn usually lacks stability due to changes in cotton distribution and worker mobility. It is not recommended to sign large-scale forward shipments of Indian cotton yarn (of course there are also concerns about the credibility of small and medium-sized yarn mills and exporters).
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