The traditional off-season in the cotton textile industry is testing the resilience of the entire supply chain with unexpected depth. The latest survey data from the China Cotton Textile Association paints a picture of increasing divergence: raw material prices are moving in different directions, yarn and fabric sectors face widespread destocking pressure, while exporters must navigate a strengthening US dollar.
Raw Material Markets: Cost Pass-Through and Geopolitical Premium Retreat
Cotton prices recently experienced a sharp rally followed by a decline. After the US-Iran agreement, external cotton prices rose, lifting Zhengzhou Cotton Futures to a peak of 16,140 yuan per ton. However, as macro sentiment faded and downstream cotton yarn demand remained weak in the off-season, prices quickly fell to around 15,615 yuan per ton. This volatility indicates a lack of fundamental drivers, with prices likely to remain range-bound in the near term.
Polyester staple fiber (PSF) more directly reflected the retreat of geopolitical premiums. With shipping through the Strait of Hormuz recovering to nearly 60% of pre-conflict levels, oil prices fell sharply, stripping risk premiums from the cost side. The polyester chain then entered a catch-down phase, with PSF futures dropping to around 6,900 yuan per ton. For polyester-blend yarn producers, cost support is rapidly eroding.
Viscose staple fiber (VSF) showed greater resilience. Tight supply has led mills to reduce rebates, while traders are raising prices. However, downstream yarn sales remain under pressure, so VSF prices are expected to stabilize.
Yarn and Fabric: Deepening Off-Season and Product Segmentation
The off-season is fully evident across the yarn market, though pressure varies by product. Pure cotton yarn prices are stable, but traders are offering discounts, and mill inventories are slowly accumulating. Vortex-spun yarn prices are weak, with mills relying on small orders. Color-spun yarn faces a stronger seasonal lull; high-count differentiated products maintain demand, but conventional items struggle with inventory.
Differentiated yarn mills operate at full capacity but suffer from poor order continuity, relying on small, scattered orders. Price competition is fierce, squeezing margins. Polyester yarn prices have fallen sharply in tandem with raw material declines, fostering a wait-and-see attitude. Viscose yarn remains relatively stable due to firm raw material costs, but sales are slow.
The fabric market is equally subdued. Grey cotton fabric shipments have slowed, with weavers accumulating inventory and purchasing raw materials only as needed. Yarn-dyed fabric orders are small, and high-count pure cotton yarn prices have dropped by about 180 yuan per ton. Fabric prices are softening in some areas, leaving thin margins. Denim markets are sluggish both domestically and internationally, with mills reducing operating rates and accelerating inventory clearance.
Exports and Macroeconomics: The Strong Dollar Variable
The persistent strengthening of the US dollar adds new uncertainty to cotton textile exports. For export-oriented categories like denim, currency fluctuations and trade policy shifts demand close monitoring. Weak seasonal demand amplifies the risk of inventory build-up from volatile export orders.
Practical Recommendations
#### For Buyers
- Current cotton prices are at the low end of the range; consider building positions below 15,600 yuan per ton, avoiding chase buying.
- PSF prices are volatile due to oil; shorten procurement cycles to weekly or ten-day price locking.
- VSF supply is tight; secure long-term contracts early to avoid short-term shortages.
#### For Exporters
- In a strong dollar cycle, include exchange rate fluctuation clauses in contracts or use RMB settlement to hedge risk.
- Monitor US-Iran agreement developments and Strait of Hormuz shipping to adjust polyester product export quotes.
- During the off-season, focus on developing high-margin products like high-count and differentiated yarns to escape price wars on conventional items.