China's cotton textile chain is undergoing a deep restructuring. In H1 2026, exports remained resilient, but the domestic market faced dual pressure from low-cost imported yarn and accelerating synthetic fiber substitution. The spread between domestic and international cotton prices widened to multi-year highs, fundamentally altering raw material trade flows, yarn pricing systems, and export structures. The industry has moved from uniform growth to a phase of structural divergence, where precision operations are no longer optional but essential for survival.
Widening Price Spreads: Import Yarn and Synthetic Fiber Squeeze
The most prominent price signal in H1 was the persistent expansion of the domestic-international cotton price gap. International cotton prices remained weak due to ample global supply, while domestic prices stayed relatively firm thanks to sufficient destocking. This gap directly spurred a significant surge in cotton and cotton yarn imports. According to China Customs data, cotton import volume grew sharply year-on-year in H1, with Brazilian cotton surpassing US cotton to become the top import source for domestic mills, driven by price advantage and supply stability.
The yarn market also showed divergence. Domestic cotton yarn maintained firm pricing due to stable quality, fast delivery, and suitability for high-end weaving. In contrast, imported yarn from Vietnam, India, and Indonesia saw continuous price drops, flooding the domestic mid-to-low-end market and squeezing profit margins for small and medium mills. Meanwhile, the cotton-polyester price spread widened, enhancing the economic incentive for synthetic fiber substitution, prompting downstream fabric mills to gradually shift their raw material choices.
Global Trade Restructuring: SE Asia Dividends Fade
Global cotton textile trade patterns shifted notably in H1. Brazilian cotton exports steadily climbed, supplying major consuming countries, while traditional exporters like the US and India saw volumes shrink—signaling a gradual transfer of global cotton trade influence. Yarn trade formed a unique bidirectional flow: SE and South Asian countries exported low-cost yarn to China, while China leveraged its complete weaving and garment manufacturing chain to process final orders and export finished textile products globally.
This division of labor widened further. Amid weak global demand, textile and apparel exports from Bangladesh, Turkey, and India all declined year-on-year, as SE Asia's textile dividend gradually faded. In contrast, China's textile and apparel exports remained stable, with strong performance in the US market, supported by a complete industrial chain, consistent product quality, and reliable delivery systems, helping secure premium overseas orders and maintain market share.
Season Switch Intensifies Bull-Bear Battle
The market is currently in a logic-switching window between old and new cotton seasons. The previous season saw ample global supply and high inventory levels, suppressing any rebound in international cotton prices. China's domestic market had fully destocked, with new cotton processing and sales largely completed and spot inventories at reasonable levels. However, downstream spinning slowed and weaving demand weakened, dragging raw material consumption.
As the new cotton season approaches, global production expectations have been revised downward, raising expectations of tighter supply and providing potential support for cotton prices in H2. Yet the bull-bear battle remains intense: on one hand, new-season production cuts and the start of autumn/winter orders could trigger a turning point; on the other, high domestic raw material costs, fierce competition in low-end products, and weak off-season demand continue to weigh on the market.