23,400 CNY/ton. That was the benchmark price of cotton yarn 21S on June 29, 2026, the highest in the past 12 months. From June 29, 2025 to June 29, 2026, the price rose from an annual low of 21,766.67 CNY/ton to the peak, a cumulative increase of 1,633.33 CNY/ton, or 7.5%. What is more notable is that the current price sits at the top of the yearly range and has triggered a 'two-year overbought' alert. This indicates that the price surge is no longer a short-term fluctuation but reflects a structural shift in the industry's cost base.
Price Structure Decomposition: Three Drivers Behind the High
First, rigid cost support from raw materials. The core driver of cotton yarn prices is raw cotton. In the 2025/2026 season, global cotton production forecasts were revised downward, compounded by weather disruptions in China's Xinjiang cotton region, keeping ginned cotton prices high in the second quarter of 2026. Cotton yarn 21S, a medium-count staple, has raw material costs accounting for over 70% of its price. For every 1% rise in cotton prices, the theoretical cost of cotton yarn should increase by more than 0.7%. The current 7.5% increase from the year's low is largely aligned with the rise in cotton prices, indicating a relatively complete cost pass-through.
Second, shifts in weaving mill procurement patterns. In the first half of 2026, the comprehensive operating rate of looms in Jiangsu and Zhejiang remained at 65%-70%, down about 5 percentage points from the same period in 2025. However, cotton yarn prices did not weaken with the lower operating rate; instead, they hit a yearly high in June. The logic behind this is that mills concentrated their restocking during the low-price period in the first quarter, then entered a cycle of destocking, waiting, and restocking. At current high prices, mills are buying only for immediate needs, with little speculative inventory building.
Third, structural support from export orders. Despite ongoing restrictions on Xinjiang cotton in Western markets, demand for Chinese cotton yarn from Southeast and South Asian markets remains resilient. From January to May 2026, China's cotton yarn exports grew by about 4% year-on-year, with exports to Vietnam and Bangladesh increasing by over 10%. These orders mostly use medium-count yarns (21S-32S), directly supporting the 21S price.
Regional Divergence: Keqiao vs. Shengze
From a regional perspective, the price transmission of cotton yarn 21S varies significantly across industrial clusters. In Keqiao, Shaoxing, weaving mills focused on shuttle-woven fabrics face a squeeze: upstream yarn prices rise, but downstream fabric orders are hard to raise prices. The Keqiao Light Textile City's gray fabric price index rose only 0.3% month-on-month in June, far below the 2.1% monthly increase in cotton yarn. This means profit margins in the fabric segment are narrowing, and some mills are adjusting product mixes by reducing 21S usage and shifting to higher-count yarns (32S and above) or blends.
In Shengze, Jiangsu, where air-jet looms dominate, the reaction is more moderate. Shengze's cotton yarn consumption ratio is lower than Keqiao's, and many mills use 'point pricing plus forward contracts,' locking in prices for longer periods, so short-term volatility has a limited impact on production costs. However, traders in Shengze report that spot market liquidity for cotton yarn has declined, with low middleman inventories. If downstream orders concentrate, there could be temporary shortages.
Price Outlook and Operational Windows
Historically, the annual median price of cotton yarn 21S is 22,583.34 CNY/ton, and the current price is 3.6% above that median. In the past five annual cycles, there is about a 40% probability that the price will continue to rise after breaking the median, but over 60% probability it will decline within the following three months.
The key time point is Q3 2026. Typically, July and August are the traditional off-season for the textile industry, with loom operating rates dropping below 60%, weakening demand for cotton yarn. If cotton prices fail to break out further by then, cotton yarn 21S will likely retreat below 23,000 CNY/ton. Conversely, if the 'Golden September' orders exceed expectations, the price could challenge 23,500 CNY/ton or even higher.