In the first half of 2026, domestic and international cotton prices stabilized, but the price gap remained wide—a signal that is reshaping profit distribution along the textile supply chain. According to the China Cotton Market June 2026 report, the domestic basis stayed firm while ICE cotton futures underperformed Zhengzhou Cotton Futures, making imported cotton significantly more expensive than domestic supply.
Cost Transmission Under Price Divergence
Domestic cotton prices entered a plateau in June, with the main Zhengzhou contract oscillating in the 14,500-15,000 yuan/ton range, while ICE cotton futures hovered at 68-72 cents/lb. The resulting price gap exceeded 2,000 yuan/ton, directly raising raw material costs for spinning mills using imported cotton, especially small and medium-sized enterprises in coastal processing trade zones.
From a supply chain perspective, the impact of price stabilization on downstream weaving and dyeing sectors is delayed. Grey fabric prices began to stabilize in late June, but fabric quotes still reflect high-cost inventory from earlier periods. If cotton prices remain steady into Q3, the fabric segment may see a modest price increase driven by restocking demand.
Export Structure: Overall Stable, Regionally Divergent
Textile and apparel exports in H1 showed steady growth on a month-on-month basis, defying early-year pessimism. By category, knitted garments and man-made fiber products outperformed cotton garments, reflecting overseas buyers' shift to alternative fibers under cost pressure.
Notably, exports from major Southeast Asian producers contracted simultaneously, with Bangladesh posting the largest year-on-year decline. Bangladesh's order shrinkage stems partly from tighter EU labor scrutiny and partly from domestic energy instability. The gap is being filled by China and Vietnam—China, with its complete industrial chain, has captured more high-value-added orders in woven garments and home textiles.
Subtle Shifts in Regional Competition
The contraction in Southeast Asian exports is a short-term boon for China's textile trade, but structural risks remain. Vietnam's textile and apparel exports rose slightly month-on-month in June but stayed negative year-on-year, indicating fragile recovery. India's upward revision of cotton production forecasts could pressure international cotton yarn prices if domestic prices fall further in H2.
For Chinese textile firms, the wide cotton price gap erodes the cost competitiveness of export products. However, a relatively stable RMB exchange rate in June and falling ocean freight rates partially offset this disadvantage. Overall, the 'stable and improving' narrative for H1 textile trade reflects structural resilience rather than a full recovery.