A reading of 49.6% — just 0.4 percentage points below the 50% threshold — is enough to keep the entire cotton textile chain on high alert ahead of the traditional peak season. According to the China Cotton Textile Association's latest sentiment report for August 2026, the industry sentiment index slipped another 0.1 percentage point month-on-month, remaining in contraction territory even as the global manufacturing PMI has stayed above 50 for 13 consecutive months. The message is clear: macroeconomic warmth is not translating smoothly into textile demand.
Cost Push Across the Board, Limited Downstream Acceptance
Raw material markets staged a broad rally in August. Based on China Customs and industry data, the average spot price of grade 3128 cotton reached 17,680 yuan per tonne, up 339 yuan or 1.95% month-on-month. 1.4D direct-spun polyester staple fiber averaged 7,662 yuan per tonne, up 252 yuan or 3.40%. Mainstream viscose fiber averaged 14,241 yuan per tonne, up 21 yuan. The CF2701 cotton futures contract touched a high of 17,345 yuan per tonne, while polyester staple fiber climbed from around 7,500 yuan to 8,200 yuan.
The drivers are straightforward: stronger US cotton prices, combined with new-crop yield expectations and weather disruptions, lifted cotton valuations. The widening US-Iran conflict pushed oil prices higher, and tight PTA and MEG supply kept feeding cost pressure into the polyester chain. Viscose benefited from a recovering supply chain and low inventory, with major producers holding firm on quotes. But for downstream mills, higher raw material costs make orders harder to secure — the cost increase cannot be fully passed through to yarn and grey fabric prices, squeezing margins from both sides.
Production Contraction and Inventory Divergence Raise Doubts
Production data is more alarming. The production index came in at 49.7%, down 0.4 percentage points from July. The fabric output index fell sharply to 48.0%, down 2.9 percentage points, contrasting with the yarn output index at 51.0%. Yarn production remains in expansion while fabric output contracts, indicating that weaving mills are absorbing less demand than spinning mills — intermediate inventory pressure is concentrating in the weaving segment.
Inventory data shows similar divergence. The raw material inventory index was 48.7%, down 0.2 percentage points, with cotton stocks edging up and non-cotton fiber stocks declining, reflecting cautious, need-based procurement. The product inventory index was 49.3%, down 0.9 percentage points, but the yarn inventory index rose slightly to 49.3% while the fabric inventory index fell 2.5 percentage points. The combination of yarn accumulation and fabric destocking suggests weaving mills are cutting operating rates to avoid risk.
Sales performance can only be described as marginal improvement. The product sales index reached 50.6%, up 0.4 percentage points, barely above the threshold. The average price of 32-count combed cotton yarn was 23,568 yuan per tonne, up 0.86%, while pure cotton grey fabric averaged 7.36 yuan per meter, up just 0.27%. Yarn sales volume index was 50.2% and fabric sales volume index 50.0%, both lower than July, indicating that downstream orders starting in mid-August did not sustain momentum. Resistance to high raw material prices is evident.
The business operation index stood at 50.1%, down 0.7 percentage points, with the revenue index at 49.8%, a sharp drop of 2.8 percentage points. The profit index was 50.3%, above the threshold but with limited improvement. The business confidence index was 46.7%, up 0.9 percentage points but still deep in contraction. With weak new orders and high uncertainty, mills remain cautious. Whether the traditional peak season materializes is still an open question.
Transmission Across the Supply Chain
In major production hubs such as Jiangsu, Zhejiang, and Shandong, operating rate divergence is widening. Spinning mills with differentiated product structures can maintain some utilization, but weaving mills focused on standard grey fabric face greater pressure to cut output. Traders report more inquiries than actual transactions. Downstream garment factories are slowing autumn-winter order placement, and some export orders are shifting to Southeast Asian quotes, further suppressing domestic grey fabric demand.
For buyers, raw material prices are at a阶段性 high, and chasing the rally carries increasing risk. New cotton arrivals, oil price trends, and end-consumer recovery are key variables. If downstream orders fail to pick up in September, raw material prices could correct, leaving companies that locked in early purchases exposed to inventory write-downs.