Divergence in Raw Materials: Cotton Stalls, Polyester Leads as Textile Chain Enters Deep-Seated Game

In early September, the textile raw material market did not show the usual broad rally of the 'golden September'. Instead, a rare divergence emerged: Zheng cotton futures hovered around 17,110 yuan/ton, while spot 3128B grade cotton fell 53 yuan to 18,357 yuan/ton, widening the basis. Meanwhile, polyester staple fiber (PSF) surged 200 yuan to 8,080 yuan/ton, far outpacing cotton. This 'weak cotton, strong polyester' pattern reflects a deep tug-of-war between cost support and weak demand.

Market Context

The divergence in cotton futures and spot is not accidental. Futures were supported by expectations of tight supply before new cotton harvest, with some ginners in Xinjiang starting pre-purchases of seed cotton. However, spot trading remained sluggish, as mills avoided large-scale stockpiling, and consumption of old cotton stayed moderate. With the new harvest approaching in northern Xinjiang, supply pressure will build, limiting any upside in Zheng cotton.

Cotton yarn market mirrored real demand: prices were firm, futures inched up, but order improvements were limited. The much-anticipated bulk orders for the peak season have not materialized, with transactions mostly small and short-term. Product differentiation was pronounced: medium-to-high count compact yarns sold well, while low-count yarns faced pressure, leading to rising finished goods inventories. Procurement behavior varied by company size—small mills adopted hand-to-mouth buying to avoid price risks, while large and medium mills replenished moderately, often using post-pricing models to lock costs. These signs suggest that downstream weaving mill operating rates have not recovered significantly, and grey fabric inventories remain a burden. Further price increases in cotton yarn depend on sustained end-order growth.

Industry Impact

The PSF rally is the most notable signal this period. It was primarily cost-driven: upstream PTA and MEG prices strengthened, combined with maintenance shutdowns at some chemical fiber plants, leading to voluntary production cuts and tighter spot supply. However, demand did not surge correspondingly; downstream weavers only purchased on a need basis, with no panic buying. This indicates that the PSF price hike reflects cost pass-through and supply contraction, not genuine demand recovery. Should upstream costs fall or idled plants restart after profit recovery, increased supply would quickly pressure prices.

For the textile chain, the 'strong raw materials, weak demand' scenario means profit distribution is tilting toward upstream, squeezing the bargaining power of mid- and downstream players. Cotton spinners face not only high raw material costs but also the risk of inventory buildup due to insufficient end orders. If PSF strength cannot transmit to final products, it will burden weavers and curb their restocking appetite. This tug-of-war prevents synchronized price movements across categories, and the market lacks a basis for unilateral trends.

Practical Recommendations

For Purchasers - Stick to demand-based procurement and batch replenishment; avoid chasing high spot prices when futures-spot spreads are wide. - Closely monitor new cotton harvest progress and seed cotton prices; if spot prices decline after the new crop hits the market, adjust procurement timing accordingly. - For PSF, consider locking short-term orders while tracking PTA plant operations to hedge against price pullbacks from cost declines.

For Exporters - Include raw material price adjustment clauses in quotations or adopt post-pricing models to hedge against input cost volatility and protect margins. - Monitor actual placement of autumn/winter orders; if end demand underperforms, be cautious in accepting long-term contracts, prioritizing cash flow. - Utilize futures for hedging, especially during high volatility in Zheng cotton, to lock forward procurement costs.