Early June industry data showed that textile enterprises' industrial inventory fell to approximately 880,000 tons, a month-on-month decrease of 4%, marking a three-month consecutive decline. However, the market did not breathe a sigh of relief—the operating rate and yarn production-sales ratio dropped to 82% and 94%, respectively, with month-on-month declines of 6.8 and 8.3 percentage points, and both indicators have been declining for two consecutive months. The simultaneous destocking and demand contraction indicate that the industry is experiencing a cycle where both supply and demand are tightening, rather than a simple destocking turning point.
Weak Demand is the Core Suppressing Factor
From the data transmission chain, the two-month consecutive decline in the yarn production-sales ratio directly points to weakened purchasing willingness from downstream weaving and apparel sectors. The simultaneous drop in the operating rate suggests that enterprises have begun to actively reduce capacity to cope with insufficient orders. This rhythm of "production-sales ratio falling first, operating rate following passively" historically often indicates that price adjustments are not yet over.
Inventory decline itself is a result of supply-side contraction, but the weakening demand side has a more significant suppressing effect on prices. The current cotton yarn market sentiment score is only -1, indicating a bearish fundamental bias. In the futures market, on July 1, the main contract 2609 on the Zhengzhou Commodity Exchange settled at 22,655 yuan per ton, up slightly by 45 yuan from the previous day, but trading volume was only 12,334 lots, with open interest at 14,528 lots, showing a lack of incremental capital entering the market, and short-term upward momentum is insufficient.
Industrial Zone Response: Time Lag in Upstream-Downstream Transmission
In textile industry clusters such as Keqiao and Shengze, weaving enterprises generally report that recent new orders are mainly "small and short orders," with significantly fewer inquiries for large orders. This change in order structure directly compresses the procurement volume of upstream cotton yarn. Notably, although industrial inventory has fallen for three consecutive months, the decline has narrowed month by month (about 5% in April, 4.5% in May, and 4% in June), suggesting that enterprises' willingness to destock has weakened, with some manufacturers waiting for further price drops.
For yarn mills, the current situation is more awkward: on one hand, raw material cotton prices are supported by global production reduction expectations, limiting the downside of costs; on the other hand, downstream price pressure is strong, squeezing profit margins between yarn ex-factory prices and costs. This pattern of "rigid costs, weak demand" forces yarn mills to balance inventory and cash flow through production cuts.
Price Expectations: Short-Term Pressure, Mid-Term Focus on Policy Variables
Historically, after two consecutive months of simultaneous declines in operating rate and production-sales ratio, cotton yarn spot prices typically adjust 2%-5% over the next 4-6 weeks. The current futures main contract price is around 22,600 yuan per ton. If spot prices follow the decline, futures may test the 22,000 yuan per ton integer level.
However, the mid-term outlook is not entirely pessimistic. Data from the National Cotton Market Monitoring System also indicates that inventory has fallen to a low level in recent years. If traditional peak season (September-October) orders show marginal improvement, supply-demand dynamics could reverse quickly. Additionally, variables such as Xinjiang cotton policies and import quota adjustments could change market expectations.