The cotton textile industry chain is undergoing a painful destocking phase. The latest survey by the China Cotton Textile Association reveals that from raw materials to yarn and fabric, all segments are facing reduced orders, rising inventories, and shrinking margins. Raw material prices show divergence, while end-demand remains weak, putting the entire industry under pressure.
Divergence in Raw Material Markets
Cotton prices experienced a sharp rally and subsequent decline, now trading in a range. Driven by the US-Iran agreement boosting global sentiment, the Zhengzhou Cotton futures rose to 16,140 yuan/ton, but quickly fell back to 15,615 yuan/ton as macro enthusiasm faded and downstream demand remained sluggish. Without strong industrial drivers, cotton prices are expected to consolidate in the near term.
Polyester staple fiber saw a more direct decline. With the Strait of Hormuz shipping recovering to nearly 60% of pre-war levels, crude oil prices dropped sharply, stripping away geopolitical premiums. The cost support for the polyester chain collapsed, pushing polyester staple fiber futures to around 6,900 yuan/ton. Market attention now focuses on whether lower prices can stimulate restocking.
Viscose staple fiber moved independently. Tight factory shipments and trader price hikes pushed prices up, but downstream yarn sales remain under pressure. Supply-demand dynamics suggest a stable outlook.
Yarn Market Under Volume and Price Pressure
Pure cotton yarn continues in off-season mode. Quoted prices are stable, but actual transactions involve concessions. Spinning mills see slow inventory accumulation. Downstream weaving mills are reducing operating rates, fabric inventories are rising, and autumn/winter orders have yet to materialize. Market sentiment is cautious.
Vortex-spun yarns are weak in both volume and price, with viscose and polyester-viscose blends seeing slower sales. Mills are relying on small orders. Colored spun yarn faces destocking pressure for standard products, while high-count differentiated varieties hold up better. Differentiated yarn mills maintain full capacity but suffer from poor order continuity and compressed margins due to price competition.
Polyester-containing yarns followed raw material declines, with spot trading slowing further. Downstream buyers stick to just-in-time procurement. Product inventories are under pressure. Viscose yarns weakened despite stable raw material costs, with slow transactions and a steady outlook.
Fabric Market Order Contraction
Full-cotton grey fabric markets are weak, with slower shipments, few new orders, and rising finished goods inventory. Weaving mills purchase raw materials on a need-only basis. Yarn-dyed fabric markets are also sluggish, with cotton prices down 300 yuan/ton and high-count pure cotton yarn down 180 yuan/ton. Fabric prices are under pressure, leaving thin margins.
Denim markets are cold both domestically and internationally. The ex-factory price of 10s cotton OE yarn remained around 14,600 yuan/ton in late June. Order cuts, lower mill utilization, and slow shipments force companies to accelerate destocking. A stronger USD adds uncertainty to export conditions.
Industry Impact and Strategic Response
Companies face the dual challenge of destocking and margin protection. Raw material divergence requires flexible procurement: buy cotton on dips, watch polyester staple fiber for restocking opportunities, and lock viscose volumes early due to tight supply.
On the yarn side, standard products need controlled production and a shift toward differentiated, high-count varieties. On the fabric side, small-order, quick-response capabilities are critical to avoid inventory buildup.