INR stops depreciating, and cotton yarn downtrend stunted
INR stopped devaluating against USD and has tendency of appreciation with high cotton price but falling cotton yarn price, which is supportive to yarn price. Cotton yarn mills will be more resistant to price reduction under poor situation. Indian rupee has remained stable in recent three months, and is likely to consolidate stably in short term, unlikely to appreciate further.
In summary, price of Indian cotton yarn is competitive than that of Vietnamese one, and supply is supposed to slip. Thus, price downside potential of Indian cotton yarn is expected to be capped. Coupled with limited downside room of new Indian cotton price and appreciated INR, price of Indian cotton yarn may have touched bottom. Besides, inquiries for Indian cotton yarn have increased on Sep 5 as Chinese buyers showed higher buying interest. In a word, Indian cotton yarn price may rebound slightly in short run.
Cost support and supply/demand change
Most Indian cotton yarn mills have faced losses when price decrement of cotton yarn was bigger than cotton and more than 15% of cotton yarn mills have scaled down production or turned to produce other yarns, but price of Indian cotton yarn witnesses limited downward space with the support from cotton market, not ruling out some plants underselling to lower inventory. Supply is supposed to slip with the consumption of stocks and lower production of medium-to-low count carded cotton yarn, which may drive up cotton yarn price.