Cotton Prices Stabilize as China's Textile Exports Show Resilience in H1 2026

In the first half of 2026, China's textile and apparel exports demonstrated notable resilience. Customs data shows a slight month-on-month increase in total export value, a commendable achievement amid weak global demand. More importantly, both domestic and international cotton prices stabilized in June after a prolonged decline, with domestic basis remaining firm, injecting stability into market expectations for the second half of the year.

Behind the Price Stabilization: Supply-Demand Dynamics

The stabilization of cotton prices in June was not driven by a single factor. Domestically, Zhengzhou Cotton Futures outperformed ICE cotton futures, indicating that China's market has absorbed downstream demand better than expected. The firm domestic basis suggests that spot market purchasing intentions did not collapse during the price decline, forming effective support at lower levels. However, it must be noted that the domestic-international cotton price spread remains wide, meaning Chinese textile enterprises face higher raw material costs compared to international competitors, which continues to compress export profit margins.

Export Landscape: China Stable, Southeast Asia Diverges

China's steady textile and apparel exports in H1 contrast sharply with the simultaneous contraction in major Southeast Asian producing countries. Bangladesh, the world's second-largest garment exporter, recorded the largest year-on-year decline, with some order transfers being absorbed by China. This divergence stems from Bangladesh's energy crisis, political uncertainty, and weak demand from the EU market. For Chinese textile firms, this short-term order reshoring is beneficial, but it also signals long-term risks of global supply chain rebalancing—once Southeast Asian capacity recovers, price competition will intensify.

Impact of Price Spread on Procurement and Pricing

The currently wide domestic-international cotton price spread is reshaping the entire chain from raw material procurement to finished product pricing. Domestic spinners using local cotton face lower raw material costs than those using imported cotton, but their finished products' international price competitiveness is correspondingly weakened. Conversely, companies using imported cotton enjoy lower raw material costs but must contend with quota restrictions and exchange rate fluctuations. For downstream buyers, order quotations in H2 2026 need to more precisely lock in cotton price benchmarks to avoid profit inversions due to spread volatility.

Practical Recommendations

For Buyers - Monitor the spread between Zhengzhou cotton and ICE cotton futures, concentrating import purchases during spread narrowing windows to lock in cost advantages. - Prioritize partnerships with domestic suppliers that have access to local cotton supply chains, leveraging their cost stability to hedge against international price fluctuations. - Include cotton price floating clauses in order contracts, using changes in the domestic-international spread as pricing adjustment references to avoid unilateral risk bearing.

For Foreign Trade Enterprises - Capitalize on the current window of relative RMB exchange rate stability to accelerate export receipt collection and reduce currency exposure. - For markets left vacant by Southeast Asian export contractions (e.g., mid-to-high-end EU brands), proactively promote China's supply chain stability and delivery reliability. - Establish a dynamic monitoring mechanism for the domestic-international cotton price spread, updating quotation models monthly to ensure real-time cost alignment.