Since mid-July, China's imported cotton yarn market has experienced a wave of price increases, but the divergence behind the rise warrants industry attention. Vietnam yarn is emerging as a standout performer in port transactions, while traditional suppliers like India and Pakistan face slowing sales.
The Logic Behind the Price Hike: A Triple Squeeze
The recent increase in overseas offers is not driven by a single factor. Upstream, the rebound of ICE cotton futures in early July directly raised raw material costs. Simultaneously, significant consecutive increases in Indian domestic S-6 spot prices and CCI auction base prices further pushed up the baseline for Indian yarn offers. On the demand side, a broad month-on-month rebound in textile and garment exports from Vietnam, Pakistan, Bangladesh, and India from May to June indicates recovering overseas orders, emboldening mills to raise prices.
More critically, geopolitical factors are at play. The collapse of US-Iran peace talks and subsequent blockages in the Strait of Hormuz have not only driven up crude oil, energy, and chemical prices but also caused a resurgence in sea freight rates. For mills in India, Pakistan, and Bangladesh that rely heavily on sea transport, CNF and CIF offers have had to be raised sharply to cover the combined pressure of rising raw material, production, and shipping costs. In contrast, Vietnamese mills, benefiting from road and rail links with China, face less maritime cost pressure, allowing them to be more restrained in their price adjustments.
Market Divergence: Vietnam Yarn's Value Proposition
Industry data shows that in this round, offers for C32S and above ring-spun, compact, and combed yarns saw larger increases in FOB, CNF, and CIF terms, while adjustments for low-count OE and coarse-count yarns were relatively smaller. However, the more notable divergence is by country. Vietnamese mills were not only slower to adjust their offers compared to other Southeast Asian producers but also made smaller increases than their Indian and Pakistani counterparts. This keeps the cost-performance ratio for C40S and below Vietnamese yarn highly competitive, attracting strong buying interest from Chinese fabric mills.
Conversely, offers and bookings for second- and third-tier Indian cotton yarn have notably decreased in July, reversing the earlier trend of quick sales driven by low prices. Arrivals of Pakistani siro-spun yarn are also weakening. Market capital and orders are concentrating towards Vietnam yarn, a structural shift that may intensify in the coming weeks.
Port Inventories: Reduced Arrivals and 'Grab-for-Export' Effect
From an inventory perspective, arrivals of Uzbek cotton yarn, Pakistani siro-spun yarn, Taiwanese OE yarn, and T/C yarns from Indonesia and Vietnam have been consistently weakening over the past half-month. Meanwhile, some coastal textile and garment factories are experiencing a short-term 'grab-for-export' phenomenon, accelerating the digestion of port yarn stocks. These two factors combined have led to a steady decline in cotton yarn inventories at Chinese ports.
While falling inventories provide short-term price support, they also increase the urgency for restocking. If overseas orders continue to recover, the rapid depletion of port stocks could trigger a new round of procurement tightness and price increases.