Comprehensive analysis of operation status in spinning mills
!!Cheng Sujing, CCFGroup
2018-06-21 17:10:13
Cheng Sujing, CCFGroup, presented her report of Comprehensive analysis of operation status in spinning mills
The presentation is divided into two parts:
1. Operation status in spinning mills including price, inventory and profit. ZCE cotton futures surged by around 3,000 yuan/mt and started consolidating after sharply reduced. Cotton yarn futures surged with increasing open interest. Cotton yarn spot price also hiked and cotton industry price increase pushed up viscose industry chain, but PSF and polyester yarn prices were divided. Spread between spot and futures markets is big. PSF capacity expands fast with enlarging cotton-PSF spread.
Will substitution happen?
(1). The increase in cotton price did not last long, and profit of cotton yarn was good, therefore, the usage of VSF to substitute cotton will not be large. However, the competition in feedstock market will become more fierce with heavy expansion in VSF and PSF capacity. Cotton price, on the contrary, is expected to be strong in medium-to-long run, as there¨s obvious supply deficit in China. Therefore, the substitution of VSF to cotton may strengthen in the future from the perspective of price spread.
(2). The substitution of PSF to cotton is indirect, and is often seen in blended yarn sector.
(3). Imported cotton yarn is the biggest competitor that squeezes cotton consumption. Will it continue to snatch cotton consumption?
Summary of inventory
(1). Spinners prolonged the feedstock procurement period, with outstanding performance of cotton yarn spinners and weavers.
(2). Finished goods inventory of cotton yarn and rayon yarn plants during Jan 1-Jun 11 were slightly higher than the comparable 2017 level, while polyester yarn inventory decreased.
(3). Spinners prolong the feedstock procurement period during May-early Jun, but finished goods inventory reduced. The peak season of 2018 comes later than 2017.
Profit
The buoyant season for cotton yarn this year came later than previous years. In Mar, sales of cotton yarn for knitting were relatively good, while the one for weaving were slow. In Apr, sales of cotton yarn for weaving improved and kept good till May, while from end May, the trading sentiment started to weaken. Cotton yarn inventory began to pile up in early Jun and some prices slipped.
In the medium-to-long run, the firm cotton market will give some support to cotton yarn prices, but as cotton prices are in the adjustment, cotton yarn prices are likely to edge lower in the traditional slack season during Jun and Jul and then with higher costs, prices may stabilize gradually or even move up.
2. Index tracking system including sample design, inventory in sample enterprises, C32S production in sample enterprises and CCFGroup index view
The presentation is divided into two parts:
1. Operation status in spinning mills including price, inventory and profit. ZCE cotton futures surged by around 3,000 yuan/mt and started consolidating after sharply reduced. Cotton yarn futures surged with increasing open interest. Cotton yarn spot price also hiked and cotton industry price increase pushed up viscose industry chain, but PSF and polyester yarn prices were divided. Spread between spot and futures markets is big. PSF capacity expands fast with enlarging cotton-PSF spread.
Will substitution happen?
(1). The increase in cotton price did not last long, and profit of cotton yarn was good, therefore, the usage of VSF to substitute cotton will not be large. However, the competition in feedstock market will become more fierce with heavy expansion in VSF and PSF capacity. Cotton price, on the contrary, is expected to be strong in medium-to-long run, as there¨s obvious supply deficit in China. Therefore, the substitution of VSF to cotton may strengthen in the future from the perspective of price spread.
(2). The substitution of PSF to cotton is indirect, and is often seen in blended yarn sector.
(3). Imported cotton yarn is the biggest competitor that squeezes cotton consumption. Will it continue to snatch cotton consumption?
Summary of inventory
(1). Spinners prolonged the feedstock procurement period, with outstanding performance of cotton yarn spinners and weavers.
(2). Finished goods inventory of cotton yarn and rayon yarn plants during Jan 1-Jun 11 were slightly higher than the comparable 2017 level, while polyester yarn inventory decreased.
(3). Spinners prolong the feedstock procurement period during May-early Jun, but finished goods inventory reduced. The peak season of 2018 comes later than 2017.
Profit
The buoyant season for cotton yarn this year came later than previous years. In Mar, sales of cotton yarn for knitting were relatively good, while the one for weaving were slow. In Apr, sales of cotton yarn for weaving improved and kept good till May, while from end May, the trading sentiment started to weaken. Cotton yarn inventory began to pile up in early Jun and some prices slipped.
In the medium-to-long run, the firm cotton market will give some support to cotton yarn prices, but as cotton prices are in the adjustment, cotton yarn prices are likely to edge lower in the traditional slack season during Jun and Jul and then with higher costs, prices may stabilize gradually or even move up.
2. Index tracking system including sample design, inventory in sample enterprises, C32S production in sample enterprises and CCFGroup index view
Copyright 2018 © Zhejiang Huarui Information Consulting Co., Ltd. All Rights Reserved www.ccfgroup.com