Pakistani Yarn Gains Ground: Weakening OE Market Signals Structural Shift

China's imported cotton yarn market is undergoing a quiet but significant shift. According to customs data, May 2026 saw total imports of about 172,700 tons, down 14.03% month-on-month but up 71.75% year-on-year. Within this overall trend, open-end (OE) yarn inquiries and transactions slowed notably, with prices from traditional suppliers like Vietnam, India, and Indonesia edging lower. In contrast, Pakistani cotton yarn imports held steady month-on-month and surged 80.36% year-on-year, raising its share to 12.37%.

OE Yarn Under Dual Pressure

OE yarn faces headwinds on both demand and pricing fronts. First, the wave of Southeast Asian apparel orders diverted to China is winding down, while domestic winter-spring orders have yet to materialize, creating a demand gap. Second, market expectations of new U.S. tariffs under Section 301 in July have made importers cautious. Mills and traders in Guangdong, Jiangsu, Zhejiang, and Shandong report slow inquiries and transactions for bonded and forward OE yarn, with FOB/CNF/CIF quotes from Vietnam, Indonesia, Malaysia, and India continuing to soften. This suggests the price floor for OE yarn has yet to be confirmed, and buyers should guard against inventory depreciation.

Pakistani Yarn Gains Competitive Edge

The resilience of Pakistani yarn is no accident. At the macro level, the U.S.-Israel-Iran conflict has diverted some Southeast Asian low-count, low-margin textile orders back to China, where Pakistani mills, with their stable cotton blend and shorter shipping distance, have become primary beneficiaries. More critically, Pakistan's rupee depreciation has boosted export competitiveness; weak domestic demand has pushed mills to export more; and China-Pakistan bilateral trade facilitation measures have created a virtuous cycle. A Zhejiang-based trading firm noted that Pakistani cotton prices have corrected sharply since mid-June, mill operating rates have recovered as energy and power shortages ease, and the rupee's medium-term depreciation trend offers a window for importers to wait and buy.

Reshaping Import Landscape

Looking at source country breakdown, Vietnam's May imports were 82,050 tons (47.63% share, down 11.83% month-on-month), India's were 22,430 tons (13.02% share, down 29.38% month-on-month), while Pakistan's were 21,310 tons (12.37% share, flat month-on-month). The contrast between Vietnam/India declines and Pakistan's stability signals a shift from Vietnam's dominance to a multi-polar competition. Pakistani yarn is encroaching on Vietnam and India's low-count market share. For domestic mills, this means wider bargaining power but also a need for more refined supply chain risk management.

Practical Recommendations

For Buyers - Monitor Pakistani rupee trends and cotton price corrections closely. A wait-and-see approach is sensible, but set price triggers to avoid missing the window. - OE yarn prices may fall further; consider phased purchasing and forward contracts. Increase inquiries for Pakistani Sirospun yarn to hedge against Vietnam/India supply volatility. - Run scenario analyses for potential U.S. tariff impacts in July, and adjust bonded inventory turnover days to avoid demurrage costs.

For Traders - Leverage China-Pakistan trade facilitation policies to establish direct, long-term sourcing relationships with Pakistani mills, reducing intermediary costs. - Prepare capacity for low-count, low-margin orders diverted from Southeast Asia, but remain cautious about order sustainability to avoid idle capacity. - Build forex hedging mechanisms against Pakistani rupee depreciation; consider forward contracts or RMB settlement terms to lock in export margins.