After months of continuous decline, cotton prices finally showed signs of stabilization in June. What does this turning point mean for the upstream and downstream of the textile industry chain? Current data suggests that the 'resilience' of China's textile foreign trade is not an empty phrase, but the underlying price spread structure and regional competition landscape are setting the stage for a more complex second half of the year.
Cotton Price Stabilization: The Supply-Demand Logic Behind a Firm Basis
In June 2026, both domestic and international cotton prices simultaneously showed signs of bottoming out. The domestic spot market basis remained firm, indicating strong willingness among downstream mills to purchase on price dips, providing support to spot prices. However, the performance of ICE cotton futures was significantly weaker than that of Zhengzhou Cotton Futures, keeping the domestic-international price spread at a historically high level. This divergence means that the supply pressure from the international market—whether from bumper harvests in Brazil and Australia or the uneven recovery of global consumption—has not been fully resolved. For domestic spinning mills, the cost advantage of imported cotton is being eroded by the high spread, which protects the market share of domestic cotton to some extent but also compresses the raw material options for export-oriented enterprises.
Export Landscape: China Steady, Southeast Asia Contracts
Foreign trade data confirms the fundamentals of the first half of the year. China's textile and apparel exports remained stable overall, achieving slight month-on-month growth. This growth does not stem from a full-blown explosion in overseas demand but rather from China's ability to leverage its complete industrial chain and rapid delivery capabilities to capture market share against the backdrop of widespread pressure on Southeast Asian competitors. Data shows that exports from major Southeast Asian textile producers have contracted synchronously, with Bangladesh experiencing a particularly sharp year-on-year decline. Multiple factors are at play: Bangladesh's textile industry is still recovering slowly from the political turmoil of 2025; Vietnam and India are facing a double squeeze from prolonged destocking cycles in European and American markets and rising raw material costs. China's export performance essentially reflects a 'relative advantage' rather than 'absolute prosperity'.
Price Spread Transmission: Downstream Sourcing Strategies and Game Theory
The high domestic-international cotton price spread directly influences the procurement decisions of textile enterprises. For spinning mills focused on the domestic market, the cost-effectiveness of Xinjiang cotton becomes more prominent, while a firm basis increases the difficulty of hedging on the futures market. For garment manufacturers taking foreign orders, especially those requiring imported cotton or non-cotton fibers, controlling raw material costs becomes more challenging.
- Some large weaving mills have begun adjusting their product mix, increasing the proportion of blended fabrics using polyester, viscose, and other chemical fibers to hedge against pure cotton yarn price fluctuations.
- Small and medium-sized trading companies tend to adopt a 'short order + quick response' model, reducing raw material inventory cycles and transferring price risk upstream.
The result of this game is that while cotton prices have stabilized, the distribution of profits along the industrial chain has not improved, and profit margins in the middle-stream spinning and weaving sectors remain under pressure.
Outlook for H2: The Stress Test is Not Over
The current market signals are not entirely smooth sailing. While the contraction of Southeast Asian exports has created a window of opportunity for Chinese companies, once overseas market demand picks up or Southeast Asian production capacity recovers, China may face the risk of order backflow. Meanwhile, if the high domestic-international cotton price spread persists for a long time, it will weaken the price competitiveness of Chinese textiles in the European and American markets, especially for orders with strict origin certification requirements. For both sourcing parties and factories, the core challenge for the second half of the year is how to maintain profit margins through supply chain optimization and product differentiation in an environment of 'stable' cotton prices.