Southeast Asian Cotton Yarn Prices Surge, Vietnamese Yarn Gains Edge with Cost and Logistics Advantage

In mid-July, Southeast Asian cotton yarn ex-works prices saw a collective uptick, with C32S and above ring-spun, compact, and combed yarns recording the most significant increases in FOB, CNF, and CIF terms, while lower-count open-end and coarse yarns adjusted more modestly. This round of price hikes is driven by a confluence of factors: recovering ICE cotton futures, a cyclical rebound in textile and apparel exports from Vietnam, Pakistan, Bangladesh, and India, and rising geopolitical risks.

Three Drivers Behind the Price Surge

The first driver is upstream cotton costs. In early July, ICE cotton futures rebounded, and India's domestic S-6 spot prices and CCI auction floor prices rose sharply, directly inflating raw material costs for Indian and Pakistani spinners. The second driver is a temporary recovery in end-demand. The month-on-month rebound in textile and apparel exports from Vietnam, Pakistan, Bangladesh, and India in May-June indicates that downstream orders are being replenished, strengthening spinners' pricing power. The third driver is geopolitical tension—the breakdown of US-Iran negotiations and subsequent strikes near the Strait of Hormuz have pushed up crude oil, energy, and chemical prices, and ocean freight rates have surged again. Spinners in India, Bangladesh, and Malaysia have had to pass on these rising transport costs into their CNF and CIF quotes.

Notably, the number of low-priced offers from second- and third-tier Indian spinners, which earlier moved quickly, has dropped markedly in July, suggesting that cheaper inventory is being absorbed. This may further support prices as supply tightens.

Vietnamese Yarn's Competitive Edge

Among the price movers, Vietnamese yarn has outperformed its Indian, Pakistani, and Uzbek counterparts. Feedback from a large Shaoxing-based textile import-export company indicates that inquiries and shipments of Vietnamese yarn were more active in the first half of July. Its advantages are twofold:

• **Slower and smaller price adjustments**: Vietnamese mills have been slower to adjust their ex-works quotes compared to other Southeast Asian spinners, and C40S and below grades remain highly cost-competitive. In a buyer's market highly sensitive to price, this strategy effectively retains orders.
• **Stable logistics channels**: While tension in the Strait of Hormuz disrupts sea freight, Vietnamese mills can leverage road and rail transport to bypass maritime risks, keeping transport costs more controllable and delivery schedules more reliable.

For Chinese coastal weaving mills and traders facing similar raw material cost pressures, Vietnamese yarn offers better supply security and lower price volatility, making it a preferred choice.

Shifts in Port Inventory

Over the past two weeks, arrivals of Uzbek cotton yarn, Pakistani siro yarn, Taiwanese open-end yarn, and Indonesian/Vietnamese polyester-cotton yarn have declined steadily. Meanwhile, some coastal textile and garment factories are engaging in a short-term 'rush to export' to beat potential tariff changes, accelerating port inventory drawdowns. The combined effect has led to a steady decline in port cotton yarn stocks.

Lower inventories provide a floor for prices, but supply-demand dynamics vary across categories. High-count combed yarns, with their larger price increases, may face demand resistance downstream, while low-count open-end and coarse yarns, with smaller increases, are likely to see more rigid restocking demand.

Practical Recommendations

For Buyers - Capitalize on Vietnamese yarn's cost window: While Vietnamese mills have not fully caught up with price adjustments, C40S and below grades still offer a buying advantage; consider increasing lock-in orders. - Diversify supply sources: With low-priced Indian yarn shrinking and Pakistani yarn facing high sea freight, allocate more procurement to regions with stable road/rail logistics, such as Vietnam and Indonesia. - Monitor geopolitical risks: If the Strait of Hormuz situation deteriorates further, Middle East shipping routes may see additional cost increases, creating uncertainty for both delivery times and landed costs.

For Exporters - Optimize quotation terms: For products heavily reliant on sea freight from India or Pakistan, include freight fluctuation clauses in quotes to avoid cost inversion later. - Leverage Vietnamese logistics advantages: In export orders, prioritize Vietnamese yarn or Vietnamese blends, using stable delivery and relatively controllable costs as selling points. - Track port inventory trends: Low inventories suggest prices are prone to rise in the near term; consider raising stock levels moderately, but limit exposure to high-count yarns to avoid demand volatility.