Night Session Divergence: Cotton's Gains vs. Polyester's Pressure Reveal New Supply-Demand Dynamics

Night trading data on June 26 sent a notable signal: cotton and polyester chains diverged sharply. Cotton yarn settled at 22,210 points, up 0.52%; cotton rose 0.32% to 15,730 points. In contrast, polyester staple fiber fell 0.14% to 6,936 points, and bottle-grade chips dropped 0.21%. This divergence reflects fundamental differences in supply-demand balances.

Cotton Chain: Weather and Utilization Provide Support

Cotton and yarn strength stems from supply concerns. Xinjiang cotton regions have experienced persistent high temperatures and local drought, raising fears of lower yields for the 2025/26 season. Although official production forecasts remain unchanged, the market is pricing in a risk premium. Meanwhile, downstream weaving utilization is recovering—air-jet loom rates in Jiangsu and Zhejiang have rebounded to over 60%, with grey fabric shipments accelerating. This combination of tightening supply and improving demand provides short-term support for the cotton textile chain. Open interest in the cotton yarn September contract increased slightly during the night session, indicating active long positioning. For mills, the current cotton-yarn spread is near the historical median, implying limited spinning margins but potential for yarn to follow cotton higher if supply tightens further.

Polyester Chain: High Inventories and Weak Orders Cap Gains

Unlike cotton, polyester products remain under pressure. Staple fiber fell, bottle chips weakened, and PTA's marginal gain of 0.04% lagged far behind cotton. The core issue is inventory. Industry data shows polyester staple fiber factory inventories have climbed to over 15 days, far above last year's level. End-users are purchasing only on a need-to-order basis, with little speculative buying. Bottle chips also faced disappointment as the summer beverage season has not boosted demand as expected. Soft drink production growth slowed, delaying destocking. While PTA has cost support from PX, processing margins have been compressed below 400 yuan/ton, and further upside requires sustained improvement in downstream polyester sales.

Implications for Buyers and Mills

This night session divergence offers practical guidance. For cotton buyers, rising cotton and yarn prices signal mounting cost pressure. Monitoring Xinjiang weather is crucial; if heat persists, consider locking in forward raw material costs via futures. For polyester buyers, weakness in staple fiber and bottle chips provides an opportunity for phased price fixing, but beware of sudden PTA cost spikes. For mills with both cotton and chemical fiber operations, prioritize destocking cotton yarn while reducing polyester raw material inventory levels. Blended products (e.g., T/C yarn) may offer better margins as cost fluctuations can be hedged between the two fibers.

Practical Recommendations

For Purchasers - Cotton raw materials: If Xinjiang weather warnings escalate, consider establishing small long hedges in cotton yarn September contracts to lock in procurement costs. - Polyester raw materials: Staple fiber and bottle chips are at relatively low levels; fix prices in batches, but limit each batch to 30% of monthly consumption to guard against sudden PTA cost spikes.

For Mills - Product mix: Increase the proportion of blended yarns to capitalize on cotton-polyester price spreads and reduce single-fiber risk. - Inventory management: Maintain cotton yarn finished goods at 7-10 days turnover; compress polyester raw material inventory to under 5 days until downstream orders show clear recovery.