Cotton prices experienced a roller-coaster ride in June. The Zhengzhou Cotton Futures主力合约 peaked at 16,140 yuan/ton before retreating to 15,615 yuan/ton, a swing of over 3%. This volatility reflects a disconnect between macro sentiment and industrial fundamentals. The U.S.-Iran agreement briefly lifted offshore markets, but as speculative heat faded and the domestic cotton yarn market remained in a traditional off-season, prices quickly returned to reality. Industry data suggests that cotton lacks a clear directional driver and will likely continue to trade in a range.
Polyester staple fiber (PSF) followed a clearer bearish logic. With Hormuz Strait traffic recovering to nearly 60% of pre-conflict levels, oil prices fell sharply, and the geopolitical risk premium was fully unwound. The polyester chain then entered a catch-up decline, pushing PSF futures to around 6,900 yuan/ton. For polyester yarn mills, cost support is weakening, while downstream demand remains weak, compressing profit margins further.
Viscose staple fiber (VSF) moved independently. Factories reduced rebates, traders faced tight supply, and prices edged up. This tight supply is expected to persist in the short term. However, downstream viscose yarn sales are under pressure, with yarn prices weakening instead. This divergence between raw material and finished product prices indicates that end-users are unwilling to absorb higher costs. VSF prices are likely to stabilize rather than trend upward.
Yarn Sector: Inventory Buildup and Order Fragmentation
Cotton yarn markets continue in the off-season. Mills have not adjusted list prices, but trade discounts are widespread. Finished goods inventories are slowly accumulating, downstream weaving operating rates are declining, and grey fabric stocks are rising. Autumn/winter orders have not yet materialized, and mills remain cautious. This "quoted but not traded" situation suggests that price signals are distorted, with actual transaction values staying low.
Vortex-spun yarn and colored spun yarn face similar conditions: weak volume and pricing, slower sales, and small-lot production. Differential yarn mills maintain full capacity, but order continuity is poor, with new orders mostly small and scattered. Although product inventories have not increased, profits are being squeezed by intense price competition. Polyester yarn prices followed raw material declines, and off-season effects further dampened spot trading, adding to inventory pressure.
Viscose yarn prices are weak, with slow transactions and just-in-time downstream procurement. Mill operating rates and inventory levels remain unchanged, indicating a stalemate where upstream players are reluctant to cut prices aggressively, while downstream buyers wait for clearer signals.
Fabric Sector: Lower Operating Rates and Destocking
The grey fabric market is stable but weak. Shipments have slowed, new orders are scarce, and finished goods inventories are building. Weaving mills purchase raw materials on a need-to basis, with no appetite for stockpiling. This "zero inventory" strategy is passing pressure back to the yarn segment. The market is expected to remain subdued.
Yarn-dyed fabric markets are also slowing. Mills operate normally but rely on small orders. Raw cotton prices have dropped by about 300 yuan/ton, and high-count cotton yarn prices have fallen by around 180 yuan/ton. Fabric prices have loosened in some segments, leaving razor-thin margins. Mills remain cautious, and market confidence needs rebuilding.
The denim sector is under more severe pressure. In late June, the ex-factory price of 10s open-end cotton yarn held around 14,600 yuan/ton, but both domestic and export markets are sluggish. Orders are shrinking, mill operating rates are declining, and finished goods are not moving. Companies are accelerating destocking. Meanwhile, the U.S. dollar index continues to strengthen, adding uncertainty to export markets. Industry players are closely monitoring export trends.