Cotton yarn price is expected hard to increase in short run

3. Profit of cotton yarn mills deteriorates gradually.

Spot profit of cotton yarn mills decreases all the way alongside the rise of cotton price and it approaches cost line even if using state reserved cotton. That is to say, they are at a loss no matter using stocked cotton or spot cotton, which is also a reason why production is cut or suspended.

Cotton yarn price is expected hard to increase in short run. If downstream demand improves, the spinners will reduce discounts at first instead of raising offers. At present, downstream orders keep sluggish and procurement for rigid demand is also weak. Adding the unclear direction of China-US trade war, they prefer to keep cautious. Most market players hold pessimistic attitude to the negotiation between China and US on the trade war in end-Jun and to the sustainable rise of cotton due to reduced purchase demand. On the other hand, cotton yarn mills have high inventory, especially large ones which undersell frequently. They will keep destocking upon uncertainties in later market. As a whole, eyes are suggested to the negotiation between China and US in end-Jun.