Vietnamese cotton yarn producers face a period of uncertainty due to raw material price volatility and the ongoing trade war between the US and China, which threatens demand stability from Chinese textile and clothing manufacturers. China is the largest importer of Vietnamese yarn and accounts for more than 60% of Vietnam's total yarn exports. And concern about Chinese clothing manufacturers losing US sales amidst the trade war between Washington and Beijing is being compounded with fears about squeezed margins, despite a new rebound in China imports in the January-March quarter. The Vietnam Textile and Apparel Association (VITAS) pointed out that from October 2018 to January 2019 the gap between raw cotton buying prices paid by Vietnamese yarn producers and product selling prices was only US$0.50-60 per kilo, well below the US$ 1 per kilo that yarn producers need to maintain operations. In February, the difference grew to nearly US$1 per kilo, hut VITAS warned that this margin might fall back again because of uncertainty caused by the US-China trade negotiations, especially if the talks falter. Among the reasons for inflated cotton input prices are tight supply in India's cotton-exporting southern states as well as China's Xinjiang province owing to adverse weather conditions.
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