In early July, finished yarn inventory at domestic cotton yarn enterprises reached 30.61 days, a slight increase of 0.02 days from the previous period. While the increment is modest, the absolute level is among the highest in recent years, signaling that the cotton textile industry is grappling with the dual pressures of weak off-season demand and inventory buildup.
Supply-Demand Imbalance Behind High Inventory
The direct cause of high inventory is persistently weak downstream demand. The deepening textile off-season has led to sluggish orders in end-use markets like apparel and home textiles, with weaving mills showing low purchasing willingness and restocking limited almost entirely to rigid needs. According to industry data, as of July 9, finished yarn inventory was notably higher year-on-year, with slow destocking. This 'high inventory, low turnover' state directly pressures spot prices.
Supply-side pressure is equally concerning. Although some small and medium spinners have proactively reduced operating rates or limited production, overall output still exceeds downstream absorption capacity. The industrial chain transmission mechanism shows that yarn inventory flows sluggishly from spinners to weavers and dyers, with intermediate players having little stockpiling appetite, further aggravating inventory pile-ups at mills.
Price and Market Expectation Chain Reactions
High inventory's suppression on cotton yarn prices has extended from spot to futures markets. Under a fundamentally weak pattern, cotton yarn futures prices are under short-term pressure with insufficient rebound momentum. The multi-score rating system gives a -1 score, reflecting widespread market caution.
From industrial cluster reactions, traders in major producing areas like Shandong, Henan, and Jiangsu report fewer inquiries recently, with actual transactions mostly involving small or urgent orders, and large orders almost absent. Some companies have begun offering small discounts to ease cash flow pressure, but this has not effectively boosted overall volumes. This 'price cuts don't drive volume' situation suggests market confidence has yet to recover.
Notably, high cotton yarn inventory is not a short-term issue. If the off-season extends into August-September, inventory could climb to 35 days or higher, exerting greater price pressure. Meanwhile, raw material cost expectations before the new cotton crop's arrival will also influence spinners' pricing strategies.