On August 18, the cotton yarn futures contract will be listed on the Zhengzhou Commercial Exchange, which means that the futures contract that has been anticipated for several years will finally come to fruition. In 2015, we published two articles, “Must-Read to Prepare for Cotton Yarn Futures: The Most Comprehensive Report on the Basic Knowledge of Cotton Yarn” and “To build the cotton yarn and cotton industry chain, this important analysis framework must be thoroughly understood”, which provided a basic introduction to cotton yarn futures. A brief introduction to the above-mentioned knowledge was given, including the design of cotton yarn futures contracts, the production process and classification of cotton yarn, the consumption and distribution of cotton cloth and textile clothing downstream of the industrial chain, and the analysis of import, export and price of internal and external yarns. However, as the official launch time of cotton yarn futures approaches, we hereby launch a cotton yarn futures tool book to once again conduct an in-depth and systematic review of cotton yarn-related knowledge.
1. Basic knowledge of cotton yarn
1.1 What is cotton yarn
Cotton yarn is made from cotton fiber through spinning process The resulting yarn is called cotton thread after plying.
To be more specific, cotton yarn is made from random short fibers such as raw cotton, which are spun into fiber aggregates such as continuous cotton yarn or cotton blended yarn through the cotton spinning process. In the actual production process, raw cotton enters the cotton spinning mill in the form of compressed cotton bales. The fibers are in a lumpy and disordered state, containing a variety of impurities and defects. Therefore, during spinning, it is necessary to “relax first and then gather”, that is, first break the gaps between fibers. Unnecessary connections are made, impurities and defects are removed, and the yarns are arranged along the axial direction into yarn strips of required thickness, and then appropriately twisted to form cotton yarn.
1.2 Uses of cotton yarn
Cotton yarn is the most basic material used for thread making and weaving. Most of the cotton yarn is used to produce various types of cotton cloth (also called gray cloth). After dyeing and processing, it is widely used in end-consumer fields such as home textiles, clothing textiles, and industrial textiles. A small part is used to make sewing threads, embroidery threads, etc.
1.3 Classification of cotton yarn
From the raw material side, fibers are divided into natural fibers and chemical fibers. Chemical fibers are divided into man-made fibers (including viscose fiber, acetate fiber, etc.), synthetic fibers (polyester fiber, nylon fiber, nylon fiber, etc.) and inorganic fibers; while natural fiber yarns are divided into plant fiber yarns, animal fiber yarns, and cotton yarns. Belongs to the plant fiber yarn category. The classification of cotton yarn will be introduced in detail according to the different classification methods.
(1) According to the spinning process
Carded yarn: It is a yarn spun from cotton fiber through an ordinary spinning system. This type of yarn has many short fiber components. , the fibers have poor parallel straightness, loose structure, lots of plush, many lumps and nodes, and poor quality. They are mostly used as raw materials for general fabrics and knitwear. Carded cotton single yarn specifications are generally divided according to count: 70-56, 55-44, 43-37, 36-29, 28-19, 18-17, 16-10, 9-7, 6-3.
Card spinning process: cotton blending → blowroom → carding → drawing → roving → spun yarn → doffing (manual winding/automatic winding) → finished product inspection.
Combed yarn: It is a yarn spun from cotton fiber through a combed spinning system. Combed yarn is made of high-quality raw materials. The fibers in the finished yarn are straight and parallel, with less knots, good luster, even dryness, and high strength, but the cost is high. This type of cotton yarn is mostly used for weaving high-end fabrics. Combed cotton single yarn specifications, divided by count, are 150-131, 130-111, 110-91, 90-71, 70-56, 55-44, 43-37, 36-29, 28-19, 18- 16.
Combering and spinning process: cotton blending→blowrooming→carding→drawing→winding→combing→drawing→roving→spun yarn→doffing (manual winding/automatic winding )→finished product inspection.
(2) According to the spinning principle:
Spinning with both ends held: such as ring spinning and compact spinning. Among them, ring spinning is the most commonly used spinning method on the market. The fiber strips after drawing the sliver or roving are introduced through the rotation of the ring traveler. The bobbin winding speed is faster than the traveler, and the cotton yarn is added Twisted into fine yarn. It is widely used in various short fiber spinning projects, such as carded, combed and blended spinning.
Free end yarn: such as open-end spinning and siro spinning. It refers to condensing and twisting fibers into yarn in the flow field of a high-speed rotating rotor or in an electrostatic field. The twisting and winding of the yarn are completed by different components, so the efficiency is high and the cost is low. At present, open-end spinning is mainly suitable for spinning coarse and medium-sized (medium and low-count) yarns. Some methods also have limitations in the types of raw materials suitable for spinning.
Vortex spinning: improved by utilizing the principle of air swirling.
Our most common yarns are ring spinning and open-end spinning. Ring spinning is divided into carded cotton yarn (such as C21S, C32S, C40S) and combed cotton yarn (such as JC32S, JC40S, JC60S , JC80S). The underlying object of the cotton yarn futures contract is C32S carded yarn.
(3) According to thickness habits
Coarse count yarn: Cotton yarns with 17 counts and below are all coarse count yarns. Mainly used for weaving thick or piled or looped cotton fabrics, such as coarse cloth, flannel, strong cloth, etc.
Mid-count yarn: 18-27 count cotton yarn is a medium-count yarn, used for weaving plain cloth, twill cloth, satin and other general fabrics.
Fine count yarn: Cotton yarn with a count of 28 and above, used for weaving fine cloth poplin, high-grade needles, and woven fabrics.
(4) Cotton yarn is classified by use
Woven yarn (also called woven yarn, referred to as WVG): the yarn used to weave woven fabrics becomes woven yarn, Can be divided into warp yarn and weft yarn. The warp yarn is used in the length direction of the woven fabric and has a large twist (The process removes more impurities and defects, and has the advantages of fewer defects, low impurity content, and high fiber uniformity. Differences in product specifications and production processes make cotton yarns have certain differences in evenness, strength, twist, impurity content, etc., which in turn results in differences in their wearing properties and fabric styles. For example, 40-count combed cotton yarns have different characteristics in terms of softness, durability, etc. Its abrasion, drape, and pilling properties are slightly better than those of 32-count carded cotton yarn.
This also determines that cotton yarn consumption is characterized by “strong individual demand and weak use substitution”. For example, 32-count carded cotton yarn is mostly used for weaving work clothes, casual fabrics, high-end denim, etc.; 40-count combed cotton yarn is mostly used for weaving underwear, shirts, bedding, high-end clothing fabrics, etc. Based on the above attributes and characteristics, setting a single specification for delivery in cotton yarn futures can ensure the consistency of delivery specifications for downstream companies. That is, the warehouse receipts obtained through the centralized delivery link of the futures market are all 32-count carded cotton yarn, which strengthens the transaction and delivery targets. Certainty, thus ensuring clear futures price signals.
(9) Delivery method: physical delivery
Physical delivery is the “bridge” and “link” connecting the futures market and the spot market. The physical delivery system can ensure that cotton yarn futures and spot price trends are consistent, which is conducive to the functioning of the futures market.
(10) Transaction code: CY
Cotton yarn is called “cottonyarn” in English. According to the principle of simplicity and ease of memory, the transaction code is set as “CY”.
(11) Other Terms
In addition to the above terms, the trading time, listing exchange and other terms are determined in accordance with common practice.
5. Arbitrage Strategy
With the listing of cotton yarn futures, cotton yarn futures as a financial tool will better serve upstream and downstream enterprises. Spinning mills can use cotton and cotton yarn futures to The tool locks in spinning profits; downstream weaving mills can also lock in raw material costs through cotton yarn futures or establish virtual inventory on futures.
Due to more than ten years of experience in cotton futures operations and the comparison of cotton yarn cost prices, it is expected that cotton yarn will operate in a more rational manner in the early stage of listing. Any overshoot or overfall that deviates from the spot price is an opportunity to enter the market. . According to the previous launch of new varieties, cotton yarn may contain participation opportunities in the first two years of its launch, and the high correlation between cotton yarn, cotton, and PTA can be used for cross-variety arbitrage or futures and spot arbitrage.
On the other hand, although the Zhengzhou Commercial Exchange stipulates that imported cotton yarn is currently not allowed to be delivered, the import price index of 32-count carded cotton yarn has a correlation of 97% with the domestic cotton yarn price index. Imported cotton yarn traders can Use cotton yarn futures for trend hedging.
