When upstream raw material prices hit a four-year high, textile mills unexpectedly slowed their price hikes. This is not a sign of fading demand but a structural reshuffle within the industrial chain.
According to China's National Bureau of Statistics, the national PPI rose 3.9% year-on-year in May 2026, widening 1.1 percentage points from April and hitting a four-year high. However, the month-on-month increase plunged from 1.7% in April to 0.5%, a drop of 1.2 percentage points. For the textile industry, this contrast means upstream cost pressure is still accumulating, but midstream and downstream enterprises can no longer fully absorb it.
Upstream Price Drivers Shift: From Oil to Industrial Upgrading
From a year-on-year perspective, the industries driving PPI upward have clearly shifted. Non-ferrous metal mining surged 36.5% year-on-year, non-ferrous metal smelting and rolling rose 24.0%, and coal mining and washing increased 10.0%. Behind these gains are the explosion in AI computing demand and the acceleration of high-end manufacturing transformation—fiber optic manufacturing prices rose 8.0% month-on-month in May, integrated circuit packaging and testing prices increased 2.9%, and electronic equipment manufacturing prices also rose.
The petrochemical chain directly related to textiles tells a different story. Price increases for chemical raw materials, chemical fiber manufacturing, and rubber and plastic products slowed by 6.3, 4.1, and 0.2 percentage points month-on-month, respectively. This means the momentum for price hikes in textile upstream sectors like chemical fibers and auxiliaries is rapidly fading.
Why Month-on-Month Growth Slowed: Oil Price Transmission Failed
The most direct cause of the narrowed month-on-month PPI increase was the slowdown in international crude oil price momentum. In May, oil extraction prices turned from a 24.1% month-on-month increase in April to a 1.8% decline, while refined petroleum product manufacturing prices shifted from a 19.0% increase to a 0.3% decline. For the textile industry, raw materials like PTA, polyester filament, and polyester staple fiber are highly correlated with crude oil. As oil price gains stalled, the chemical fiber chain quickly came under pressure.
Seasonal domestic demand provided some offset. The "peak summer" period began in May, with coal mining and washing prices rising 3.2% month-on-month, electricity supply prices up 0.4%, and household air conditioner manufacturing prices up 0.9%. This demand affects the textile industry indirectly—higher electricity costs increase processing fees for dyeing and weaving, but the impact is limited.
Structural Dilemma in the Textile Chain: Hot Upstream, Cold Downstream
The current divergence between PPI and CPI is significant: May CPI rose only 1.2% year-on-year, with core CPI at 1.1%. This means upstream industrial price increases far exceed downstream consumer goods, causing cost pressure to accumulate within the chain. For the textile industry, although upstream chemical fibers, yarns, and greige fabrics have seen price increases, downstream apparel and home textile companies face weak end-consumer demand and have very limited room to raise prices.
Feedback from industrial clusters in Shengze and Keqiao indicates that month-on-month transaction price increases for greige fabrics in May were generally below 0.5%, far lower than the 2%-3% increases for chemical fiber raw materials. Fabric traders widely report that brand customers have extremely low acceptance of price hikes, and order price negotiations are taking longer. This "hot upstream, cold downstream" pattern is squeezing profit margins for midstream weaving and dyeing processes.