Cotton prices experienced a roller-coaster ride in early July, with the Zhengzhou Cotton Futures主力合约 peaking at 16,140 yuan per ton following the US-Iran agreement, then retreating to 15,615 yuan per ton as macro sentiment faded. This volatility underscores the dual pressures of weak off-season demand and eroding cost support across the cotton textile chain. The 127th survey by the China Cotton Textile Association reveals that the entire industry, from raw materials to fabrics, is entering a new de-stocking cycle, but different segments show clear divergence.
Raw Materials: Cost Transmission Breaks
The cotton market remains in a "ceiling above, floor below" state. While external markets were buoyed by geopolitical easing and grain market gains, domestic cotton yarn transactions remain sluggish, lacking follow-through momentum. Polyester staple fiber faces a steeper decline—after the Strait of Hormuz shipping recovered to nearly 60% of pre-conflict levels, crude oil premiums evaporated, dragging the polyester chain down, with short-fiber futures falling to around 6,900 yuan per ton. This means cost support for chemical fiber yarns is weakening, with further downside possible.
Viscose staple fiber is the only "contrarian" in raw materials. Tight mill supply and trader markups have pushed prices up, but this strength stems from supply-side constraints, not demand. Downstream viscose yarn prices are actually weakening, indicating that cost increases are not passing through, squeezing spinners' margins.
Yarns: Divergence Deepens, Full Capacity vs. Inventory Build
Pure cotton yarn markets remain in the off-season doldrums. Mills haven't officially cut prices, but trade concessions are widespread, pulling actual transaction prices lower. Inventories are slowly accumulating, downstream weaving utilization is declining, and autumn/winter orders have yet to materialize. Vortex-spun yarns,色纺纱, and polyester yarns all face weak volumes, falling prices, and growing de-stocking pressure. Polyester yarns, hit by raw material plunges, are seeing further trading slowdowns, with orders limited to small, scattered lots.
However, differentiated yarn producers continue running at full capacity with order backlogs of about one month. This highlights a key trend: while conventional products are trapped in price wars, high-value-added differentiated products enjoy relatively stable demand. In a downturn, product structure upgrade is not a slogan but a survival necessity.
Fabrics: Utilization Drops, Export Uncertainty Rises
Grey fabric markets are slowing, with weavers accumulating inventory and purchasing raw materials only for immediate needs, showing no stockpiling intent. In yarn-dyed fabrics, raw cotton prices have dropped about 300 yuan per ton, and high-count pure cotton yarn prices have fallen about 180 yuan per ton, but fabric prices have only softened selectively, leaving margins razor-thin. Denim markets are quiet both domestically and internationally, with factory utilization declining and inventories being aggressively cleared.
The strengthening US dollar adds uncertainty to export environments. For denim and yarn-dyed fabric exporters, exchange rate volatility combined with shrinking overseas orders means a challenging second half of 2023. Companies must closely monitor export trends and prepare hedging strategies.
Industry Outlook: De-stocking May Extend Through Q3
Inventory pressure is cascading from fabrics to raw materials. Cotton prices will likely oscillate in a range without substantive demand support. Polyester staple fiber still has downside risk. Viscose staple fiber's strength is unsustainable. For yarns, price competition in conventional varieties will intensify, and companies must watch cash flow. The key inflection point will be whether autumn/winter orders materialize in August-September.