Cotton Textile Market Deepens Downturn: Dual Pressure of Inventory Correction and Raw Material Volatility

Cotton prices experienced a roller-coaster ride in late June: the Zhengzhou Cotton Futures主力 contract first surged to 16,140 yuan/ton, then fell back to 15,615 yuan/ton. This volatility reflects a tug-of-war between macro sentiment and industry fundamentals. The US-Iran agreement initially boosted external markets, but the traditional off-season in cotton yarn quickly dampened speculative enthusiasm. With limited industrial drivers, prices are now trapped in a range-bound oscillation.\n\nPolyester staple fiber followed a more straightforward downward trajectory. The Strait of Hormuz shipping recovery to nearly 60% of pre-conflict levels triggered a retreat in crude oil premiums, dragging the entire polyester chain into a correction. Futures for polyester staple fiber slid toward 6,900 yuan/ton. The cost-side squeeze is transmitting downstream, reshaping pricing for polyester-blended yarns.\n\nViscose staple fiber, however, took a divergent path. Tight factory shipments prompted traders to raise prices, creating temporary supply-demand imbalance. But this tightness stems more from supply constraints than demand pull—downstream viscose yarn sales remain under pressure, and prices struggle to follow raw material gains, suggesting the strength is unsustainable.\n\n## Yarn Sector: Inventory Buildup Meets Order Fragmentation\n\nThe pure cotton yarn market is a textbook example of the off-season. Spinners' quoted prices appear stable, but trade-level discounting is widespread, keeping actual transaction prices low. Finished goods inventories continue to creep up, downstream weaving mills are reducing operating rates, and grey fabric stocks are rising. Autumn/winter orders have yet to materialize, and mills' sentiment has shifted from caution to conservatism, with purchasing intentions near zero.\n\nVortex-spun and color-spun yarns are also under pressure. Vortex-spun viscose and polyester-viscose blends are experiencing volume and price declines, with transactions moving to negotiations. Mills rely on small orders to maintain production. For color-spun yarns, demand for high-count differentiated products remains relatively stable, but standard varieties face significant destocking pressure. Terminal orders are scarce, and wait-and-see sentiment prevails.\n\nDifferentiated yarn mills maintain full capacity utilization, but order continuity is poor, with new orders mostly small and scattered. The off-season, combined with declining downstream operating rates, has intensified price competition, squeezing profit margins further. While mills remain cautiously optimistic, the reality is shorter lead times and thinner margins.\n\n## Fabric Sector: Just-in-Time Procurement and Export Uncertainty\n\nThe grey fabric market is weak but stable, with slower shipments and limited new orders, mostly small-lot quick-response ones. Weaving mills' inventories are building, and raw material procurement is strictly just-in-time. No one is willing to take on inventory risk. The outlook remains subdued.\n\nYarn-dyed fabric mills operate at normal capacity but lack new orders. Raw cotton prices have dropped about 300 yuan/ton, and high-count pure cotton yarn prices have fallen about 180 yuan/ton. However, weak downstream demand means fabric prices are only partially adjusted, leaving razor-thin margins. Market confidence needs a boost.\n\nThe denim market is quiet both domestically and internationally. The ex-factory price of 10s OE cotton yarn for denim hovers around 14,600 yuan/ton. Downstream orders are shrinking, mill operating rates are falling, and finished goods are not moving. Mills are accelerating destocking. The stronger US dollar adds uncertainty to export conditions, and industry players are closely monitoring trade policies.\n\n## The Logic of the Current Destocking Cycle\n\nThe core challenge for the cotton textile industry is balancing inventory digestion with raw material price risk during a demand slump. Cotton prices are range-bound, polyester staple fiber is still bottoming out, and viscose's tightness is unlikely to persist. Without clear direction from raw materials, downstream buyers stick to essential procurement.\n\nThis destocking pain may last longer than expected. Order fragmentation, margin compression, and inventory buildup are widespread, but sub-sectors diverge: high-count differentiated products maintain demand, while standard varieties face price wars. Exporters must also watch currency fluctuations and geopolitical risks.\n\n## Practical Recommendations\n\n### For Sourcing Teams\n- For cotton yarn, consider phased purchasing to take advantage of price oscillations; avoid chasing rallies or selling into dips.\n- Viscose products are tight short-term, but downstream follow-through is weak; lock in volumes against confirmed orders rather than building speculative inventory.\n- Polyester-blended yarn prices have not stabilized; wait for raw material markets to find a floor before committing to medium-term procurement.\n\n### For Exporters\n- Monitor the US dollar trend; consider adding exchange rate adjustment clauses in export contracts to protect margins.\n- For denim and other export-sensitive categories, track destination market trade policy changes closely and adjust order books accordingly.\n- Use the off-season window to optimize supply chains and build flexible partnerships with suppliers to handle small-order, quick-response demands.