Domestic cotton prices in China have strengthened on supply tightening expectations, while international prices have fallen due to macro headwinds and improved weather in US cotton regions—this divergence is becoming the most critical pricing signal for the textile industry.
Supply Side: Output Fears and Inventory Drawdown Converge
Xinjiang cotton areas are facing a critical weather test. China's Central Meteorological Observatory forecasts sustained high temperatures of 37-43°C in northwest and south of North China during the first week of July, just as cotton enters the peak blooming and boll-setting period. The duration of heat stress, water and fertilizer availability, and extreme weather patterns will determine final yields. Although some areas in southern Xinjiang have experienced periodic high temperatures, comprehensive irrigation and management have prevented widespread damage so far.
Domestic commercial inventories continue to decline, providing underlying support for prices. The Zhengzhou Cotton Futures main contract settled at an average of 16,099 yuan/ton this week, up 230 yuan/ton or 1.4% from the previous week. The National Cotton Price B Index, representing standard-grade lint cotton prices in inland markets, averaged 17,643 yuan/ton, up 166 yuan/ton or 0.9%. This means raw material procurement costs are steadily rising for textile enterprises.
On the international front, the USDA's June 30 planted acreage report showed 2026 US cotton planted area at 9.85 million acres, up 6% year-on-year. Meanwhile, the India Meteorological Department expects July monsoon rainfall to be below normal, and Reuters reports Indian cotton acreage has fallen 35% year-on-year. Brazil's new cotton harvest is progressing smoothly, with exports of 146,800 tons in the first 14 working days of June, up 10.6% from June 2025. The global cotton supply picture shows clear regional divergence—northern hemisphere output concerns versus southern hemisphere bumper harvests and exports.
Demand Side: EU Regulations and Southeast Asian Export Slump
Pressure on the demand side is intensifying. The EU has announced a fixed tariff on cross-border parcels valued under 150 euros effective July 1, and the Ecodesign for Sustainable Products Regulation (ESPR) takes effect July 19, banning the destruction of unsold clothing. These two policies will directly increase compliance costs and tariff burdens for textile and apparel exports to the EU, creating new barriers for Chinese foreign trade enterprises relying on cross-border e-commerce and fast fashion models.
Southeast Asian major countries' textile and apparel export data have already flashed red. In May, Bangladesh's exports were only $440 million, down 90% both month-on-month and year-on-year; Cambodia's exports were $180 million, down 88% month-on-month and 87% year-on-year; Vietnam's April exports were $3.72 billion, down 9% month-on-month and 4% year-on-year. These figures reflect a rapid contraction in global textile and apparel final consumption, which may be further exacerbated by the new EU regulations.
Domestically, the macro picture is sending positive signals. June's Manufacturing PMI was 50.3%, up 0.3 percentage points from the previous month, returning to expansion territory. Profits of industrial enterprises above designated size grew 18.8% year-on-year, indicating improving economic sentiment and industrial profit recovery. According to information released by the China Council for the Promotion of International Trade on June 30, the number of overseas exhibition projects by enterprises in machinery, textiles and leather products, and transportation and logistics—the three traditional advantageous industries—ranked in the top three, demonstrating continued foreign trade vitality.
Supply Chain Transmission: Yarn and Chemical Fiber Chain Reactions
Raw material fluctuations are transmitting downstream. This week, domestic C32S carded yarn prices fluctuated slightly, with the weekly average down 10 yuan/ton to 23,264 yuan/ton; major import source C32S carded yarn prices were weaker, down 178 yuan/ton to 22,861 yuan/ton, which is 403 yuan/ton lower than domestic yarn. This means imported cotton yarn is becoming more price-competitive, potentially pressuring the domestic cotton yarn market.
Meanwhile, domestic polyester staple fiber prices continued to decline, with the weekly average down 178 yuan/ton to 7,187 yuan/ton. The weakening of chemical fiber prices somewhat alleviates raw material cost pressure for textile enterprises, but also reflects the reality of generally weak downstream demand.