The cotton textile market is experiencing its most significant off-season pressure of the year in July. The 127th large-scale survey by the China Cotton Textile Association paints a clear picture: diverging price trends in raw materials, accumulating inventories in yarns and fabrics, and further compression of corporate profit margins. This is not a simple cyclical fluctuation but a signal of accelerating profit divergence across the industry chain.
Raw Materials: A Three-Way Tug of War, No Clear Direction in the Short Term
Cotton prices experienced a rapid surge in early July followed by an equally swift correction. The main contract on the Zhengzhou Commodity Exchange briefly hit 16,140 yuan per ton before falling back to 15,615 yuan per ton, a swing of over 500 yuan. The core driver of the rally was external sentiment—expectations of a US-Iran agreement boosted grain markets and drove up foreign cotton. But domestic fundamentals failed to keep pace: the downstream cotton yarn market is in its traditional off-season with weak orders, and speculative capital withdrew quickly, sending prices back to fundamentals. Public data indicates the cotton market lacks a single directional driver and will likely trade in a range in the near term.
Polyester staple fiber has been the worst performer among the three key raw materials. With shipping through the Strait of Hormuz recovering to nearly 60% of pre-conflict levels, international oil prices have fallen steadily, and the geopolitical risk premium has been almost fully unwound. As costs collapsed, the entire polyester chain began a catch-down correction, with staple fiber futures dropping to around 6,900 yuan per ton. For polyester-blend yarn producers, lower raw material costs should be a positive, but the simultaneous decline in yarn prices means actual margins have not improved, and inventory devaluation is adding pressure.
In stark contrast, viscose staple fiber has strengthened. Factories have reduced rebate incentives, and traders have raised prices due to tight supply. This counter-trend strength is the result of deliberate supply-side contraction—tight factory delivery schedules will not change in the short term. However, downstream viscose yarn sales remain under pressure, and the price pass-through is weak, meaning the benefits of higher viscose staple fiber prices are concentrating upstream.
Yarns and Fabrics: Destocking Takes Center Stage
The pure cotton yarn market remains in an off-season rut. Mill quotations are largely stable, but concessional selling by traders is widespread, keeping actual transaction prices low. Finished product inventories are still slowly accumulating, downstream weaving operating rates are declining, grey fabric stocks are rising, and autumn/winter orders have not yet materialized. This data points to one conclusion: the market isn't suffering from a lack of sellers but from a lack of buyers—end demand is weakening faster than companies can adjust production.
The situation in colored spun yarn and differentiated yarns is particularly telling. For colored spun yarn, demand for high-count specialty variants is relatively stable, but destocking pressure on standard grades is heavy. Differentiated yarn producers are running at full capacity, but new orders are small and scattered, with poor continuity, severe price competition, and further margin erosion. This means even in relatively high-end segments, companies cannot fully escape the off-season impact; they can only maintain operating rates by sacrificing margins.
The grey fabric and yarn-dyed fabric markets are equally challenging. Grey fabric shipments have slowed, with mills adopting a hand-to-mouth procurement strategy and showing little willingness to build inventory. In the yarn-dyed segment, raw cotton prices have fallen by about 300 yuan per ton, high-count pure cotton yarn prices by about 180 yuan per ton, and fabric prices are showing localized weakness with razor-thin margins. The behavior of weaving mills has fundamentally shifted: from proactive stocking to passive destocking, from pursuing scale to preserving cash flow.
Export Front: Strong Dollar Compounds Off-Season Weakness
Data from the denim fabric market provides an important external perspective. In late June, the ex-factory price of 10s open-end cotton yarn for denim remained near 14,600 yuan per ton, but both domestic and export markets were sluggish, with orders shrinking, factory operating rates declining, and finished goods moving slowly. Companies are rushing to destock.
More noteworthy is the impact of a strengthening US dollar on textile exports. For Chinese textile companies pricing in renminbi, a stronger dollar erodes the price competitiveness of exports in overseas markets—unless companies are willing to concede margins. But with margins already near zero, there is little room for concession. Companies are closely monitoring export trends, and this uncertainty is suppressing the pace of order releases.