Industry Observation: The Global Yarn Market Is Generally Struggling

 

At present, the global yarn market is generally struggling. Although prices in some regions showed signs of stabilizing last week, this may be related to the recent rise in the price of raw cotton substitutes, which makes textile mills unwilling to reduce their quotations.

At present, the product inventory of the cotton mills is generally higher than the normal level. A few weeks ago, the momentum of the improvement of production and sales of Chinese cotton mills began to recede. The prevention and control of the epidemic continued to bring pressure on domestic textile demand, and exports were affected by the Xinjiang cotton ban. As China's textile downstream (knitting and weaving) is extremely important to other countries, difficulties in the Chinese market also bring pressure to the textile industry in other regions.

In this regard, orders from wholesalers are particularly important. The fact is very clear. Due to the over booking in 2021 and the first half of 2022, the inventory of various products of the textile mill has been transferred from the origin to the sales area, and cotton is also a part of it. Now, wholesalers are concentrating on clearing up inventory. In the case of global macroeconomic uncertainty, this practice undoubtedly makes the market more worried about downstream demand. As a result, orders in all sectors of the entire textile industry have stagnated.

From the retail data of the United States, the month on month growth in October this year was 1.3%, and the year-on-year growth was 8.3%, which was better than the market expectation. This may just reflect the impact of inflation on prices, that is, the growth of retail sales exceeded the growth of retail sales, but it did not really reflect the decline in market demand. From the retail data in October, the retail sales of clothing and clothing related products were basically flat on a month on month basis, with a year-on-year growth of 3.1%. Therefore, if the retail demand in the United States, the world's largest consumer market, does not increase in quantity, why can it remain stable even if the economy continues to decline?

Obviously, if retail consumption remains relatively active in the future (this idea is unrealistic when the Federal Reserve continues to raise interest rates), once the current retail inventory is exhausted, orders should return to a relatively normal level. The risk and opportunity lies in that if the inventory clearing in the middle link of the supply chain is excessive, the whole market will be very sensitive to the increase in demand, which needs more attention in the future.