The off-season effect in the cotton textile industry is now spreading from downstream end-users to the entire upstream raw material chain. The latest survey data from the China Cotton Textile Association shows that from cotton and polyester staple fiber to various yarns and grey fabrics, the entire supply chain is experiencing a painful de-stocking phase, with slowing shipments, shrinking orders, and rising finished product inventories.
Raw Material Divergence
Raw material markets show clear divergence. Cotton prices briefly surged on the US-Iran deal news, with Zhengzhou cotton futures hitting 16,140 yuan/ton, before retreating to 15,615 yuan/ton as macro sentiment faded and downstream yarn demand remained weak. The market lacks a single driving factor and is expected to trade in a range.
Polyester staple fiber saw more dramatic moves. With Hormuz Strait traffic recovering to nearly 60% of pre-conflict levels, geopolitical premiums evaporated, dragging polyester chain prices down. Short-fiber futures fell to around 6,900 yuan/ton. The focus now shifts to downstream restocking behavior after the correction.
In contrast, viscose staple fiber remains tight on supply, with mills reducing rebates and traders raising prices. Supply constraints may persist, but downstream yarn sales pressure caps upside. Prices are likely to stabilize.
Yarn Sector Under Pressure
Yarn markets bear the brunt of the downturn. Pure cotton yarn prices hold steady, but traders offer discounts, keeping transaction prices low. Mill inventories accumulate slowly, downstream weaving operating rates decline, and grey fabric stocks rise. Autumn/winter orders have yet to materialize, and sentiment is cautious.
Differentiated yarn mills run at full capacity but face poor order continuity, relying on small, scattered orders. Profits shrink amid fierce competition. Vortex-spun and colored yarns also see slower trading and rising destocking pressure.
Polyester-blended yarns, hit by falling raw material costs, have yet to stabilize. Buyers only purchase on a need-to basis, leaving mills with growing inventories. Viscose yarns suffer from a cost-price inversion, with slow sales and few new orders.
Fabric Sector Slowdown
Fabric markets reflect the same off-season weakness. Grey fabric mills see slower shipments, with orders limited to small, quick-turnaround lots. New orders are scarce, and finished goods inventories rise. Mills adopt a hand-to-mouth procurement strategy for raw materials.
Yarn-dyed fabric orders are mostly small, with weak new order momentum. Cotton prices fell by about 300 yuan/ton, and high-count pure cotton yarn prices dropped by 180 yuan/ton. Fabric prices are under pressure, squeezing margins. Denim markets, both domestic and export, are sluggish, with lower orders, reduced mill operating rates, and accelerated destocking.
A notable risk is the strengthening US dollar, which adds uncertainty to export markets. Companies are closely monitoring export trends and reassessing their outlook.