Indian cotton yarn price cooled down after a large rise

1. Indian and Pakistani yarn quotations fell, especially false high-priced Indian yarn which dropped dramatically

Since early-Dec 2021, forward imported yarn price began to rise significantly, reached a high point and maintained in early-Jan, and then began to decline rapidly in late-Jan.

From December to early-Jan, Indian and Pakistani forward cotton yarn prices began to rise, and then fell rapidly after a short-time of stability in mid-Jan. Indian carded 21S, 32S, combed 32S and OEC16S all decreased by more than 5%. Carded 32S for weaving and air-jet, contamination controlled, decreased by about $0.5/kg while carded 21S for weaving, contamination controlled, and combed C32S for knitting dropped by about $0.22/kg and $0.3/kg respectively. Indian open-end yarn moved down slightly. Comparatively speaking, the decline of Pakistan forward cotton yarn was relatively small, as a result of limited price rise in the earlier stage, and second-lined siro-spun carded 10S declined by more than $15/bale.

2. Why did Indian cotton yarn offer cool?
The price drop was mainly due to the imbalance of supply and demand caused by the false high quotation of mills and traders in the early stage and the higher offer failed to attract buyers.

1. Much lower price of spot Indian imported yarn ebbed demand for forward purchase. Almost all varieties exported from India to China was relatively higher than the price of China local imported yarn in the early stage, and the large inverted range was more than 3,000yuan/mt, hardly accepted by Chinese buyers.

2. The increase of profit margin of local textile mills in India was lower than that of cotton yarn price. According to some traders and mills, the purchase began to decline in mid-Jan, and local buyers hesitated and expected to cut price.

In late-Dec, Indian forward yarn offer was still rising. Although there was still a lot of overseas demand at that time and inquiry from buyers was very considerable, actual transaction was not much. During mid-January, Indian yarn mills and traders obviously felt that the trading was declining, but most of them chose to quote stably rather than cut price, so overseas buyers still stood on the sidelines. In late-Jan, with the approaching of holidays, the demand for Indian yarn in China and Vietnam market weakened. Panic of some Indian yarn mills and traders grew and they began to tentatively reduce yarn prices. In January, the psychological price of Chinese buyers of Indian carded 32S was seriously lower than the forward quotation. The price difference was once more than 30cents/kg, equal to more than 2,200yuan/mt. Therefore, Chinese traders basically did not buy. Indian manufacturers began to gradually cut down their quotations from mid-Jan to about $3.2/kg, down more than 35cents/kg from a high point.

As of Feb 3, 2021, price spread between Indian spot and forward imported yarns greatly reduced. The spot prices of carded 32S and combed 32S were very close to the forward. Although the holiday was approaching, there were still a small number of trades from China, and the inquiry increased significantly compared with mid-Jan. For example, the quotation of carded 32S for weaving was offered at $3. /kg, and the actual traded price was at $3.1-3.15/kg, and the actual orders can be negotiated. Spot Indian open-end yarn was obviously lower than the forward, but the inquiry also increased slightly compared with mid-Jan. In addition, Indian local market revived after nearly a week's wait-and-see period for local buyers. Pakistani cotton yarn price spread also improved, but the overall trading sentiment was plain.

3. Conclusion and outlook
After a sharp rise in forward imported yarn price from December to mid-January, it experienced a downward in late-Jan. False high-priced Indian yarn decreased by more than 35cents/kg, and the trading sentiment was slightly warmer. Price of Pakistani yarn also decreased. After the decline, the price difference between the spot and forward began to narrow, but most of the varieties still saw higher forward yarn price, which was close to the psychological price of Chinese manufacturers, but there was no obvious profit margin. Therefore, the actual purchase hesitated, the inquiry increased, and most traders expected the price to be further reduced and then they replenished. However, India recently announced that it will impose a tariff on imported cotton, which supported Indian cotton. Indian forward yarn also stopped falling temporarily due to this influence. If Indian cotton is firm in the later stage, Indian forward yarn will drop slightly. It is preliminarily expected that the Indian forward yarn may still be weak. In addition, another reason for China's hesitation was that Indian cargos can be sold to March to April. If the arrival time of orders is likely to be after April, China's traditional peak season of textile and apparel will soon be missed, and the exchange rate fluctuation is also under consideration, so the current price difference is still hesitating.

From inventory, the inventory of Indian yarn mills decreased rapidly due to the strong demand at home and abroad in the early stage, and the inventory burden was small. After a wave of sharp price reduction, further decline was limited.