China's cotton textile sentiment index for May 2026 stood at 49.9%, down 0.1 percentage point from April, slipping back below the 50-point threshold after a brief expansion in March. While the headline move is marginal, the breakdown reveals structural tensions: production and sales indices both rose, yet volumes tell a different story.
Raw Materials: Cotton Volatility, Non-Cotton Divergence
The raw material procurement index came in at 50.2%, still above the boom-bust line but down sharply by 2.5 points month-on-month — the largest decline among all seven sub-indices. Cotton procurement plummeted 6.5 points to 47.3%, indicating mills actively scaled back purchases ahead of the slow season.
On pricing, the monthly average of domestic Grade 3128 cotton reached RMB 17,373 per ton, up RMB 504 or nearly 3% from April. However, this average masks intra-month swings: the main CF2609 contract hit a year-to-date high of RMB 16,955 per ton right after Labor Day, then slid to RMB 15,855 before stabilizing. The retreat was driven by a pullback in ICE cotton and growing domestic off-season expectations.
Non-cotton fibers showed divergence. 1.4D direct-spun polyester staple fiber averaged RMB 8,027 per ton, down RMB 150 or 1.83%, pressured by volatile crude oil and improved Strait of Hormuz transit expectations. In contrast, mainstream viscose fiber averaged RMB 14,035 per ton, up RMB 325 or 2.37%, as mills raised offers but downstream buyers, sitting on ample inventories, refrained from volume purchases.
Production vs. Sales: A Price-Volume Disconnect
The production index for May was 50.3%, up 0.9 points from April, returning to expansion territory. Yarn and fabric output sub-indices hit 50.1% and 51.4%, respectively, both above 50 and up 1.1 and 2.3 points. Yet the equipment utilization rate remained below threshold at 49.5%, suggesting that output growth came from existing capacity running at full tilt rather than new capacity additions.
The product sales index also registered 50.2%, up 2.5 points. But this figure contrasts sharply with actual sales volumes. The representative 32-count pure cotton combed yarn averaged RMB 23,739 per ton, up RMB 1,048 or 4.62%; pure cotton grey fabric averaged RMB 7.43 per meter, up RMB 0.51 or 7.35%. Despite the price hikes, the yarn sales volume index fell to 47.7%, while the fabric sales volume index edged up to 48.8% — both still below 50.
The implication is clear: downstream buyers are balking at elevated raw material costs, shifting to hand-to-mouth procurement. The price pass-through is breaking at the weaving and garment stages, and the strategy of destocking through price increases failed in May.
Inventories and Confidence: Passive Stockpiling, Weak Sentiment
The product inventory index dropped 3.2 points to 48.0% — a reading below 50 means inventories are rising, and the lower the index, the faster the buildup. Yarn inventory stood at 48.7%, fabric inventory at 46.8%, both deteriorating from April. With sales weakening, sustained production inevitably leads to passive inventory accumulation.
The business confidence index rose 2.7 points to 49.4%, improving but still below the boom-bust line. Mills widely expect the off-season to persist, with orders weakening and sales slowing.
One bright spot: the profit sub-index within the business operations category came in at 50.7%, above 50. This reflects that mills which stocked cheap cotton earlier were able to sell finished goods at higher May prices, temporarily expanding margins. But this benefit is non-recurring — as low-cost inventories are consumed, procurement costs will rise, and margin pressure will likely surface in June-July.