Data from July 9 reveals the true color of the off-season for the cotton textile industry: finished cotton yarn inventories at mills reached 30.61 days, up only 0.02 days from the previous period. Although the increase is small, this figure has already entered a historically high range, a signal that cannot be ignored.
When inventory days exceed 30, it means that even if production stops, existing finished goods can sustain sales for more than a month. Against the backdrop of no significant improvement in downstream demand, this inventory level directly translates into downward pressure on spot prices.
The Logic Behind High Inventories
The 30.61-day inventory is not a sudden accumulation. Looking at the industry chain, the textile off-season has deepened since June, with terminal apparel consumption entering a lull. Weaving mill operating rates have declined, and the pace of cotton yarn procurement has slowed significantly. Market restocking is almost entirely compressed to essential needs, meaning buyers purchase only what they need, maintaining no safety stock.
This 'zero inventory' procurement strategy has significantly slowed the consumption rate of finished yarn at mills. Although some enterprises have proactively reduced production, inventory digestion remains slow. The minimal increase of 0.02 days from the previous period precisely indicates a fragile balance in the market—neither a major accumulation nor a clear turning point for destocking.
Dual Pressure on Prices and Futures
High inventories directly transmit to the price end. In the spot market, cotton yarn quotations have softened, with actual transaction prices for some varieties 100-200 yuan/ton below listed prices. Traders generally report more inquiries but fewer firm orders, with transactions mainly driven by maintaining existing customer relationships.
On the futures side, there is also a lack of upward momentum. The weak fundamental pattern remains unchanged, and capital lacks the willingness to go long. The main cotton yarn futures contract has recently fluctuated at low levels, with the basis narrowing against spot prices, reflecting a bearish market expectation for the future.
From a cost perspective, although cotton prices remain relatively stable, they have not provided sufficient cost support for cotton yarn. The spread between cotton and cotton yarn continues to narrow, squeezing spinning profits. Some small and medium-sized enterprises are already near the breakeven point.
Differentiated Responses Across Industrial Clusters
Different industrial clusters show varying capacities to bear inventory pressure. In traditional cotton spinning clusters like Shandong and Henan, enterprises are larger and have relatively ample funds, so inventory pressure is more reflected in capital turnover efficiency. In contrast, small and medium-sized enterprises in Hebei and Jiangsu face greater cash flow challenges, with some factories having shortened operating hours to control output.
Notably, production areas focused on differentiated yarns, such as Guangdong and Zhejiang, have relatively controllable inventory levels. The homogeneous competition of conventional pure cotton varieties amplifies inventory risk during the off-season.
Transmission Effects on Procurement and Foreign Trade
For buyers, high inventories mean increased bargaining power. The current cotton yarn market has turned into a buyer's market, allowing procurement companies to moderately negotiate prices, but they must be wary of quality risks in low-priced goods.
On the foreign trade front, overseas orders are also affected by the global economic slowdown. Demand for Chinese cotton yarn from Southeast Asian textile countries has weakened, and coupled with RMB exchange rate fluctuations, the competitiveness of export quotations faces challenges. Some foreign trade companies report that order volumes for the third quarter have decreased by 10%-15% year-on-year.