The inflection point of imported yarn appears, the future is optimistic and the future is worrying

From June 12th to 13th, the 2014 Imported Yarn Forum was held in Hangzhou. Many imported yarn suppliers lamented the difficulty of doing business, saying that the current situation is “surviving in the cracks.” In the speeches of the guests, “turning point” and “change” became key words.
Has the advantage of imported yarn ceased? How will the imported yarn market develop in the future? At the 2014 Imported Yarn Forum, the participating guests agreed that the current imported yarn market structure is changing – the varieties are changing from single to comprehensive, the use area is gradually extending from the coast to the central and western regions, the operators are more mature, and the operations are becoming more rational. Although affected by environmental factors such as policy adjustments, it will be difficult for the imported yarn market to grow as fast as in the previous two years in the next two years, butin the long term, the market share of imported yarn will expand.
​Look at the data – the growth curve is now falling
From fiery to rational, this transformation of the imported yarn market is also reflected in the changes in data. 2012 was the peak of rapid growth in my country’s imported yarn. In that year, 1.5265 million tons of cotton yarn were imported, a year-on-year increase of 69.01%. In 2013, although the growth rate decreased, the total import volume exceeded the 2 million tons mark, reaching 2.0984 million tons, a year-on-year increase of 37.47%. Recent statistics show that from January to April, my country’s cotton yarn imports totaled 695,000 tons, an increase of 7.2%, which was significantly slower than the 51.3% increase in the same period last year. For this year’s cotton yarn imports, some people predict that it may be basically the same as last year, while others think that it may be difficult to reach 2 million tons.
Why has the imported yarn market experienced such significant changes in just two years? Zheng Shengwei, information manager of Zhejiang Huarui Information Co., Ltd., analyzed that the adjustment of my country’s cotton policy is an important factor affecting the imported yarn trade. Since the cotton purchase and storage policy has been canceled in the new year and replaced by direct subsidies, domestic cotton prices are expected to fall. Affected by the decline in domestic cotton prices, the price gap between domestic and foreign cotton has generally narrowed, and domestic yarn prices have fallen accordingly, putting pressure on imported yarns. Domestic companies have become less enthusiastic about imported cotton yarns.
In fact, one of the main reasons for the rapid growth of imported yarn in 2012 is that the domestic purchase and storage price is 19,800 yuan/ton, resulting in a huge price difference between domestic and foreign cotton prices. At that time, the price of some imported cotton yarns was even lower than the price of domestic cotton, which attracted companies to use imported yarns in large quantities. As a result, cotton yarn imports increased significantly.
As the price difference between domestic and foreign cotton shrinks, the price advantage of imported cotton yarn is no longer obvious. In addition, the operation cycle of imported yarn is long, and yarn users dare not prepare forward futures due to concerns about falling prices. Other companies reported that due to insufficient understanding of the quality of imported cotton yarn, some problems occurred in production, which also affected the use of imported cotton yarn. Due to various factors, some companies have given up on imported yarn and switched to domestic yarn.
​Look at the pattern – gold emerges from the waves
​From a deeper level, the imported yarn market structure is changing. Zheng Shengwei analyzed that the turning point in the development of the imported yarn market has appeared.
From the perspective of varieties, the demand for imported yarn is differentiated. At present, the import of pure cotton yarn is still the mainstream. Among them, carded yarns with a count of 8 to 25 account for more than 50%. Carded yarns with a count of 25 to 47 are the products with the fastest import growth in recent years, and their proportion continues to increase. Combed yarns with a count of 25 to 47 are also increasing year by year. situation. Overall, the variety of imported yarns has changed from single to comprehensive. The import of pure cotton yarns has extended from low-count to medium-count areas, and from carded to combed areas. The substitutability of domestic yarns has gradually increased. From the perspective of usage area, the usage companies were initially concentrated in several industrial clusters in coastal provinces such as Guangdong and Zhejiang and gradually extended to the central and western regions.
From the perspective of the source countries of imported cotton yarn, India has surpassed Pakistan to become China’s largest source of imported cotton yarn. Zheng Shengwei analyzed that the products of Bar yarn are relatively single, and the market of Bar yarn is the most mature in China. With the adjustment of downstream demand products, the share of Bar yarn is gradually decreasing. With the deepening of trade between China and India, printed yarn has aggressively entered the field of low- and medium-count yarns with a count of 21 to 40 to seize market share, and the imported cotton yarn trade pattern has undergone major changes. In addition, cotton yarn imported from the United States, Thailand, and Indonesia increased by 117.11%, 115.42%, and 85.72% in 2013, and new markets have attracted much attention.
From the perspective of operators, due to the substantial increase in the total volume of imported cotton yarn in 2012, the number of participating groups surged in 2013. As competition intensified, profits were continuously compressed. Chen Qinfeng, general manager of Cathay Group, said that after the market turbulence in the second half of last year, one-third of operators have been eliminated, and the number is expected to continue to decrease in the next year. After the survival of the fittest, the market has cultivated a group of relatively mature importers and dealers. They are paying more and more attention to improving service quality and integrating resources, and their operations have become more rational.
After several waves of adjustments, imported yarn practitioners have “transformed” compared to previous years in terms of business philosophy and operational proficiency.
Look at the prospects – optimistic about the future but worried about the near future
In 2014, the three-year purchase and storage policy was stopped and replaced by a series of policy attempts such as direct subsidies to cotton farmers. When analyzing future cotton price trends, participants generally believed that it would take another three years to digest the huge state cotton inventory. In the process of destocking,Cotton prices will remain low domestically. In this environment, the rapid growth trend of imported yarn caused by the huge cotton price difference will be difficult to continue. On the other hand, the domestic economic growth has slowed down and the textile market has continued to be sluggish. With the overall demand weak, the demand for imported yarn has also weakened accordingly. At the same time, the imported yarn trade has experienced a vicious cycle due to the imbalance in value distribution. Market refusals to pay and refuse goods occur frequently, and calls for purifying the trade environment are becoming increasingly strong. Therefore, Chen Qinfeng said that the next two years may be difficult.
Although the growth rate of imported yarn may fall sharply in the next two years due to factors such as cotton policy adjustments and weak overall market demand, participants are still optimistic about the prospects of the imported yarn market. Due to the increase in various costs of cotton textile enterprises, especially due to the impact of high cotton price differences in recent years, the product structure of domestic spinning enterprises has an obvious trend of shifting to non-cotton. Data show that in 2013, the proportion of my country’s pure cotton yarn production dropped from 40% in 2012 to 37%, while the proportion of pure chemical yarn and blended yarn increased accordingly. Part of the market demand for pure cotton yarn is filled by imported yarn.
At present, global resource integration has become a general trend. Factors such as constraints on raw materials and rapid growth in labor costs have forced domestic spinning companies to change their strategies, shift to producing products with higher added value, and move to countries and regions with more advantages. In the long run, imported yarn will still occupy a considerable market share in my country’s cotton yarn market. Chen Qinfeng predicts that imported cotton yarn will have room to double in the next five years, and annual imports may reach 4.5 million tons.