The cotton yarn market is slowing down, domestic orders are insufficient, and the inventory increases slightly. It is expected that the price will be stable and weak.

In foreign countries, the international cotton demand has undergone tremendous changes due to the outbreak of the epidemic. At the beginning of 2020, USDA estimates indicate that the cotton consumption in 2019/20 (until July 2020) will be 26.2 million tons, which is similar to the cotton consumption in the previous two years. Since then, all US Department of Agriculture reports have lowered consumption expectations, which were lowered by 5.1% in May and 2.2% in June. Since the Sino-Indian military conflict broke out on the border and caused casualties, India’s attitude towards China has deteriorated sharply. India has banned 59 types of Chinese mobile applications at home and blocked imports from China, but the price advantage is no longer China’s import. The main driving force for exporting cotton; coupled with the current impact of factors such as China's current domestic dumping of reserves and squeezing Indian cotton transactions, the overall impact of changes in China-India relations on China's cotton imports is relatively small. According to the 'Currency Composition of Official Foreign Exchange Reserves (COFER)' data released by the International Monetary Fund (IMF) this Tuesday, the total foreign exchange reserves of RMB in the first quarter were US$0.22 trillion, achieving five consecutive quarters of growth. The renminbi's share of global foreign exchange reserves also rose to 2.02%, setting a new historical high. According to the domestic situation, the announcement of the rotation of reserve cotton on the evening of June 30, 2020 will be implemented, and a total of 500,000 tons of reserve cotton will be scheduled to be released on the national legal working day from July 1, 2020 to September 30, 2020, and the balance will be implemented. In principle, about 8,000 tons are listed for sale every working day. Since the end of June, the pure cotton yarn market has entered the off-season. At present, the overall inventory level of textile enterprises is lower than the peak of last year’s inventory, but it has risen significantly from the previous period. In general, the inventory level of small and medium-sized textile enterprises has reached the level of 10-15 days. The inventory levels of enterprises are mostly around 25 days to one month, and the inventory of some slow-moving products has reached the level of January and a half to two months. However, due to the lack of orders, weaving mills are basically buying cotton yarn as they use it, and they are pessimistic about the market.　　Upstream: Cotton spot prices continued to rise this week, and the overall cotton spot trading declined. In the first week of the central reserve cotton rotation in 2020 (July 1-3), the standard-grade sales base price is 11837 yuan/ton. From July 1 to July 3, a total of 24,132 tons were planned to be shipped out of the warehouse, and 24,132 tons were actually traded, with a transaction rate of 100%. Crude raw materials were weak this week, and the prices of direct-spun polyester staples declined slightly. The trend of viscose staple fiber was weak this week, and the delivery of goods was slow.　　Yarn aspect: This week, the pure cotton yarn market basically maintained the trend of last week, the overall market was weak, and the quotations were mostly stable. The trading center of pure polyester yarn has been lowered, and the inventory has accumulated. The trading atmosphere in the rayon yarn market is sluggish, and the factory sales pressure is relatively high.　　 Downstream: Under the poor trading atmosphere of the cotton grey cloth market this week, the overall operating rate of the weaving mill continued to decline. The current operating level is 45.3%, which is lower than the same period in previous years. The recovery of foreign trade orders was not as expected, the domestic sales market was weakening, and the weaving factories were under greater pressure.　　 Generally speaking, the price of pure cotton yarn fell slightly this week. The prices of pure polyester yarn, polyester viscose yarn and polyester cotton yarn remained stable, while the prices of rayon yarn and cotton viscose yarn fell.　　【One-week market overview】　　 Cotton spot prices continued to rise this week, and the overall cotton spot trading was weak, spot prices were weak, and some basis-locked transactions and one-off prices were relatively good. Textile enterprises' willingness to purchase more cotton as a whole is weak, and under the influence of dumping storage, some textile enterprises with relatively low requirements for cotton quality have turned to auction storage purchases, so their willingness to purchase cotton spot has declined. Affected by the off-season, the market price of polyester short and sticky shorts dropped slightly.　　 In terms of yarns this week: the overall delivery of open-ended cotton yarns is not smooth, and the prices are stable and declining. The delivery of conventional pure cotton yarn continued to slow down this week. Some textile companies made price cuts. The inventory of textile companies increased compared with the previous period, but the pressure was not great. The market demand for combed cotton yarn was not good, and the quotations of spinning companies were more stable. There are discounts in actual transactions. High-count yarn: High-count pure cotton yarn performed generally and continued to maintain a light transaction, but the price basically stopped falling and stabilized.　　 In terms of the grey cloth market, according to the China Textile City market transaction volume statistics, the total sales volume of grey cloths this week was 38.73 million meters, an increase of 17.99 million meters from the total sales volume last week. Among them, the turnover of chemical fiber cloth this week was 24.82 million meters, accounting for 64.1% of the total sales volume, the total sales volume of cotton cloth was 2.14 million meters, accounting for 5.5% of the total sales volume, and the turnover of rayon cloth was 4.98 million meters, accounting for 12.91% of the total sales volume. This week, the price of grey fabrics has been steady and has fallen, and orders are seriously insufficient. It is expected that the market will continue to decline in July. [Spread structure and arbitrage analysis] 　　 As of July 3, the domestic CY C32 price is 18,585 yuan/ton (0), the Indian C32S price is 18,300 yuan/ton (0), the spread is 285, and the Vietnamese jet C32S price is 18,380 yuan/ton (-70) ), the spread is 205, and there is no arbitrage opportunity.　　 [Technical Analysis] 　　 This week, the cotton yarn CY009 contract rose slightly, and the overall continued sideways consolidation, with a shock range of 18890-19800 yuan/ton, the highest price of 19,330 yuan/ton, and the lowest price of 18,990 yuan/ton. On July 3, the CY009 contract open interest was 8445, a decrease of 188 lots from the previous trading day.　　[Future Outlook] 　　 This week, the cotton yarn CY009 contract continued sideways, with a shock range of 18,890-19,800 yuan/ton; the cotton yarn market was poorly traded, and the inventory of weaving mills was not digested, and it was still rising slightly. The overall downstream orders are insufficient, and the support for cotton yarn is limited. It is expected that the price of cotton yarn will be stable and weak in the short term. In the short-term, pay attention to the 19000 first-line support. If the support is broken, you will continue to hold short orders. The profit and loss ratio is 3:1; speculators can go short with the interval pressure; textile enterprises can hedge appropriately according to the inventory pressure. (For reference only) Key words of the article: 　Cotton Yarn Market