July's cotton textile sector is experiencing a typical off-season pain. The latest survey by the China Cotton Textile Association paints a picture of divergence: cotton prices first rose then fell, polyester staple fiber declined with falling raw material costs, while viscose staple fiber rose against the trend due to tight supply. Downstream orders are shrinking, finished goods inventories are accumulating, and the yarn and fabric sectors are under destocking pressure. This adjustment is not a broad retreat but a structural divergence, with clear gaps in price trends and order rhythms across categories.
Raw Material Side: Cost-Driven Price Divergence
The cotton market experienced a volatile period in early July. A US-Iran agreement boosted global financial markets, driving external cotton prices up and pushing domestic Zhengzhou Cotton Futures to a high of 16,140 yuan/ton. However, as macro sentiment was fully priced in and speculative enthusiasm cooled, combined with the traditional off-season for cotton yarn and limited industrial drivers, prices fell back to a low of 15,615 yuan/ton. Overall, market drivers are limited, prices face two-way pressure, and a range-bound trend is likely, creating greater uncertainty for textile mills' raw material procurement strategies.
Polyester staple fiber showed a one-way downward trend. With the Strait of Hormuz shipping volume recovering to nearly 60% of pre-conflict levels, oil prices fell sharply, and geopolitical risk premiums were fully unwound. After the cost side squeezed out risk premiums, the polyester chain began a catch-up decline, with staple fiber futures falling to around 6,900 yuan/ton. For polyester-blended yarn producers, falling raw material prices directly erode product margins, while downstream buyers adopt a wait-and-see attitude, focusing on just-in-time purchases, making order volumes difficult to expand.
In stark contrast, viscose staple fiber saw a tight market. Factory rebate incentives were reduced, and traders raised prices amid supply constraints. The tight delivery situation is expected to persist in the short term. However, downstream yarn sales face pressure, so viscose prices are likely to remain broadly stable, meaning viscose yarn producers will face margin compression from rising raw material costs that cannot be passed through.
Yarn Segment: Order Gaps and Category Divergence
The off-season characteristics of the yarn market deepened in July. The pure cotton yarn market continued its off-season pattern, with prices broadly stable. Mill offers showed no significant adjustment, but trader profit concessions were widespread, keeping actual transaction prices low. Finished goods inventories at spinning mills slowly accumulated, downstream weaving operations declined, grey fabric inventories grew, and autumn/winter orders had yet to materialize. Mills are cautious about future markets, reflected in procurement strategies: just-in-time purchases with low willingness to build inventory.
Performance varied significantly across yarn categories. Vortex-spun yarn saw weak volumes and prices, with viscose and polyester-viscose blends seeing slower trading; polyester yarn prices edged down with negotiated discounts. Color-spun yarn experienced a subdued off-season atmosphere, with high-count differentiated varieties maintaining relatively stable demand, but conventional varieties facing heavy destocking pressure. Differentiated yarn mills maintained full capacity utilization with order lead times of about one month, but order continuity was poor, with new orders mainly small and scattered. Although product inventories did not increase, profits further contracted. This divergence reflects fragmented end-demand, where conventional varieties face homogeneous competition and destocking difficulties, while differentiated and high-count varieties retain some demand resilience.
Polyester-blended yarns faced even greater challenges. After the US-Iran peace agreement, polyester staple fiber raw materials fell sharply, dragging down yarn prices. Combined with the off-season, trading in polyester-blended yarns further weakened, with downstream buyers focusing on just-in-time purchases. Mills operated with unsold orders, mainly small and scattered, and product inventories faced further pressure. Prices have yet to stabilize, and market wait-and-see sentiment dominates, with no near-term signs of recovery.
Fabric Segment: Declining Operating Rates and Export Uncertainty
Pressure on the fabric market is equally significant. Pure cotton grey fabric markets were broadly stable but weak, with slower shipment pace. Orders were mainly small-lot, quick-turnaround, with few new orders and rising finished goods inventories. Weaving mills face increasing operational pressure, with raw material procurement focused on just-in-time purchases and low willingness to build inventory. The market is expected to remain subdued.
The yarn-dyed fabric market slowed overall, with operating rates basically normal but orders mainly small, lacking new order momentum. Raw cotton prices recently fell significantly, by about 300 yuan/ton, making cotton yarn prices difficult to hold, especially high-count pure cotton yarn, which fell by about 180 yuan/ton. Due to weak downstream demand, most mills purchase just-in-time; fabric product prices have loosened locally, squeezing margins.
The denim market also faced a sluggish domestic and export environment. In late June, the ex-factory price of 10s OE cotton yarn for denim remained range-bound around 14,600 yuan/ton. The industry is in a traditional off-season, with shrinking downstream orders, declining mill operating rates, slow finished goods shipments, and mills accelerating destocking. Combined with a strengthening US dollar index, the export environment is uncertain, and mills are closely monitoring export trends to assess market direction.