Will Indian cotton yarn price decline further?
Indian cotton yarn prices shows signals to rebound
Price of forward cotton yarns has collapsed since mid-Aug, and decrement of Indian cotton yarn was comparatively bigger. Price of Indian carded 32S has declined by $0.5/kg from $3.1/kg to$2.6/kg since end-Jul, and during the same period, Vietnamese carded 32S has lowered by $0.3/kg.
Currently, price of Indian carded 32S for air-jet dipped to around $2.6/kg, with cost staying at around 21,560yuan/mt after-tax, including fees for customs clearance and the opening of L/C, based on 2-month forward foreign exchange, and that of Vietnamese carded 32S for rapier was around $2.68/kg, with cost staying at around 21,480yuan/mt. Price spread between Indian and Vietnamese 32S was below 100yuan/mt.
Price disparity of Indian and Vietnamese forward 32S under RMB basis has narrowed by around 1,000yuan/mt in mid-late Jul, stabilized for a period, and reduced further to below 100yuan/mt. Quality of Indian carded 32S for air-jet is better than Vietnamese carded 32S for rapier, so Indian cotton yarn enjoyed price advantage compared with Vietnamese ones.
Cotton price may decline limitedly with arrivals of new cotton
Indian cotton price is supposed to be weak at the beginning of new crop year when new cotton arrives intensively from Oct. According to the latest forecast made by Cotton Association of India (CAI), cotton supply in 2016/17 may be around 6.8mln tons, down by 4.8% compared with last season, though demand is estimated to be not changed, the supply of cotton is still expected to be tight, supportive to price. As for the MCX futures, recently, the nearby contract always declined, while forward contract always increased, indicating market players held bullish anticipation towards late market. Besides, global cotton ending stocks may reduce by around 2%.