← Business Metric: Industry Specific (Industrials & Materials) (all topics)
Spread - cotton to yarn
What it is
The margin between raw cotton cost and yarn realisation, which is the entire economics of a spinning mill. Cotton is typically 60-70% of yarn cost, so the spread is thin and volatile
It widens when cotton falls faster than yarn prices and compresses when the reverse happens
Impact on industries
- A conversion spread with no pricing power on either side - cotton is set by crop and global markets, yarn by export demand and Chinese competition
- Cotton is bought seasonally at harvest but yarn sells year-round, so mills carry large inventory at a price fixed months earlier
- Duty exemption on imported cotton widens the accessible supply and caps the domestic price, which supports the spread
- The same structure as sponge-iron-to-billet and HRC-to-CRC - one number defines the business, and inventory timing determines reported profit
Industries affected
Textile-Cotton Spinning & Yarn-Established (A/B)
Textile-Cotton Spinning & Yarn-Micro/SME & Shells
Textile-Integrated/Composite Mills-Established (A/B)
Textile-Integrated/Composite Mills-Micro/SME & Shells
Textile-MMF Yarn Spinning, Texturising & Processing-Established (A/B)
Textile-MMF Yarn Spinning, Texturising & Processing-Micro/SME & Shells