Market Analysis: Short-Term Cotton Yarn Futures Strengthened More Than Cotton Mainly Due To The Impact Of Tariff Reductions Between China And The United States

In the past week or more, Zheng Mian yarn futures continued to strengthen in shock. The main contract CY2507 rose from 18680 yuan/ton to 19855 yuan/ton, up 1175 points, or 6.29%. In the same period, Zheng Mian's main contract CF2509 rose from 12675 yuan/ton to 13480 yuan/ton, up only 805 points/ton (but also up 6.35%, slightly higher than Zheng Mian yarn).

According to the industry analysis, the strength of short-term cotton yarn futures is greater than that of cotton, which is mainly affected by the mutual tariff reduction between China and the United States (capital entering the market, increased CY2507 contract positions) The C32S cotton yarn is now hanging upside down to 1500 yuan/ton, which needs to be corrected, and the export of cotton yarn and cotton cloth has increased significantly since 2025 on a year-on-year basis. In addition to a series of domestic stimulus policies, the Central Bank has cut reserve requirements and interest rates. As a consumer terminal, the current market reaction of cotton yarn is more sensitive than cotton and other raw materials. In addition, since late April, some small and medium-sized textile enterprises in Shandong, Jiangsu, Zhejiang, Henan and other places have reduced their production, which has led to a decline in cotton yarn supply, and also promoted the rebound of cotton yarn futures.

However, from the perspective of market sentiment and feedback from cotton related enterprises, the continuous pressure of cotton yarn futures rising gradually increased. The main force CY2507 contract failed to hit the resistance level of 20000 yuan/ton continuously or faced a passive callback. The reasons are summarized as follows:

First, at present, the domestic demand for cotton textiles and clothing has entered the slack season, the overall operating rate of middle and downstream enterprises has continued to decline, and the production and sales of cotton yarn have encountered bottlenecks. On the one hand, the new orders of textile enterprises above designated size are expected to continue shrinking, and the inventory of finished products is on the increase; On the other hand, the profit margin of 40S and below cotton yarn is still significantly low, and some mainland cotton mills have expanded their losses, so they can only reduce some production capacity to cope with the arrival of the slack season.

Second, in the 90 day buffer period since May 14, although China and the United States have significantly reduced tariffs, their stimulating effect on Xinjiang cotton yarn sales is relatively limited, and the cotton yarn period is difficult to obtain effective support. The current launch is mainly for the traceability orders of cotton products exported to the United States that have been shelved, postponed or cancelled in the earlier stage. Considering that there is only a 90 day tariff buffer period (50-60 days for sea transportation), the problem of sharing 10% of the new tariff, the current ship space is out of stock, and the freight rate has risen significantly, we are very cautious in dealing with new orders from American customers and Chinese suppliers. Although the United States reduced the ad valorem tariff rate of small parcels imported from China to the United States from 120% to 54%, while maintaining the ad valorem tariff rate of $100 per piece, which is beneficial to the direct export of Xinjiang cotton products to the United States, the tariff is obviously high.

Third, recently Vietnam, Mexico, Malaysia, Singapore and other countries have strictly controlled entrepot trade. It is significantly more difficult for China's cotton textiles and clothing to bypass the "third party" to export to the United States market, and the pressure on the growth of the size of Xinjiang's cotton products to the "indirect" export of the United States to the EU market is rising.

Fourth, the expectation of continued appreciation of the RMB made the export of domestic cotton textiles and clothing not smooth. On May 13, the People's Bank of China set the RMB central parity rate below 7.2 for the first time since early April, at 7.1991. According to industry analysis, in the near future, the central parity rate of RMB will not be ruled out to be further lowered to 7.15-7.18, but the future RMB exchange rate will still depend on China's economic situation and the progress of trade negotiations.