Cotton yarn: Prices fluctuated at high levels in April, with narrow declines in May and June.

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Expert Analysis by Zhuochuang Information on Cotton Yarn Market, He Yuxin

[Introduction] Cotton yarn prices rose in the first quarter, mainly due to a significant increase in raw cotton prices, shifting the cost center upward; secondly, as the peak season arrived, spinning companies saw increased orders and improved demand. Entering the second quarter, the cotton textile market gradually enters the off-season, and downstream fabric factories face higher cost pressures. They are cautious about high-priced cotton yarn procurement, but the cost support for cotton yarn remains strong, so it is expected that cotton yarn prices may decline slightly within a narrow range.

Cost increase and demand recovery drive cotton yarn price rise

Cotton yarn prices increased in the first quarter mainly due to rising cotton prices and improved demand, which pushed up cotton yarn prices. In the first quarter, China’s Grade 3128B cotton prices rose significantly. The first quarter saw a decline in commercial cotton inventories, tightening market supply; downstream demand for stockpiling increased, with higher sales of spot cotton; and the planting area for the new season cotton was expected to decrease. Macroeconomic factors such as rising international crude oil prices increased the costs of polyester and other fibers, also boosting cotton prices. According to Zhuochuang Information monitoring, the average price of China’s Grade 3128B cotton in the first quarter was 15,602.48 yuan/ton, up 7.08% from the average price in Q4 2024. The cost center for cotton yarn rose, and with the peak season demand recovery, spinning companies’ orders increased, and sales accelerated, leading to higher cotton yarn prices. According to Zhuochuang Information, the average price of nationwide combed high-grade 32s cotton yarn was 22,701.69 yuan/ton in the first quarter, up 4.97% from Q4 2024.

Profit improvement and increased operating enthusiasm of spinning companies

As of the end of March, the theoretical profit for pure cotton combed ring-spun high-grade 32s cotton yarn was -436.31 yuan/ton, reducing the loss by 98.78 yuan/ton compared to early January. According to Zhuochuang Information research, both cotton and cotton yarn prices rose in the first quarter, narrowing the theoretical processing loss for cotton spinning enterprises. In the second quarter, the cotton textile market gradually enters the traditional off-season, and the profit performance of spinning companies may be less favorable.

As of the end of March, cotton spinning enterprises in Shandong had an operating load of 66.15%, up 0.80 percentage points from early January. Cotton prices rose in the first quarter, downstream demand recovered, fabric factories increased procurement enthusiasm, and orders from spinning companies grew. In the second quarter, with rising temperatures, fabric factory operating rates are expected to decline, and spinning companies’ orders may decrease, leading to a potential decline in operating rates.

Increased orders and eased inventory pressure

As of the end of March, Shandong cotton spinning enterprises had a order backlog of 6.00 days, up 0.50 days from early January. Cotton prices increased in the first quarter, downstream demand improved, and spinning companies’ orders increased. Trading companies replenished stocks as needed, and cotton yarn transactions increased. In the second quarter, the cotton textile market gradually enters the demand off-season, and spinning companies’ orders are expected to decrease.

As of the end of March, Shandong cotton spinning enterprises held 27 days of cotton yarn inventory, unchanged from early January, with the highest inventory point at 31 days in the first quarter; cotton inventory available at these enterprises was 26 days, up 5 days from early January. The first quarter saw rising cotton prices and recovering demand, leading to increased orders. Raw material-wise, Zhengzhou cotton futures prices rose, and cotton spinning companies purchased on dips based on demand. In the second quarter, demand is expected to gradually weaken, and cotton yarn inventories at spinning companies may gradually accumulate.

High prices fluctuate in April, with narrow declines expected in May-June

Supply and demand analysis: In the second quarter, overall cotton yarn supply is sufficient, and the market transitions from peak to off-season, with demand expected to weaken. Fabric factories’ procurement enthusiasm declines, and spinning companies’ orders gradually decrease, leading to rising inventories.

From the raw material side, the domestic new season cotton planting will commence, with a high probability of decreased planting area. Additionally, the U.S. cotton yield for the new season is also expected to decline, leading to tight supply expectations domestically and internationally. In April, the downstream textile market is in the seasonal tail of demand, with cotton consumption still supported. In May and June, as the new season cotton planting concludes, market focus may shift to spot cotton inventories. Due to increased local cotton spinning capacity in Xinjiang and higher local conversion rates, the inventory of spot cotton is expected to tighten, potentially pushing prices higher. The strong cost support for cotton yarn also supports higher spot prices.

In summary, from April to June, cotton prices are expected to trend relatively strongly, supported by costs. April remains in the traditional peak season, but demand gradually weakens in May and June, possibly reducing orders for spinning companies and exerting downward pressure on cotton yarn spot prices. Therefore, cotton yarn prices are expected to fluctuate at high levels in April, decline narrowly in May-June, with April prices possibly rising by 200 yuan/ton to 23,200-23,600 yuan/ton, stable in May at 23,200-23,600 yuan/ton, and falling by 200 yuan/ton in June to 23,000-23,400 yuan/ton. Close attention should be paid to order follow-up and macro market changes later on.