The 127th market survey by the China Cotton Textile Association paints a picture of an industry caught in a deepening off-season and a painful destocking phase. The raw material market shows a rare three-way divergence: cotton prices rose then fell on macro sentiment, polyester staple fiber dropped following crude oil cost collapse, and viscose staple fiber rose due to tight supply. This asynchronous movement has disrupted cost transmission downstream, squeezing yarn mills' profit margins.
Raw Materials: Between Cost Logic and Speculation
Cotton prices experienced an emotion-driven rally. After the U.S.-Iran agreement, external markets pushed domestic Zhengzhou cotton futures to a high of 16,140 yuan/ton, but the macro premium quickly faded, and prices fell back to around 15,615 yuan/ton. This volatility reflects a market lacking fundamental drivers, with downstream cotton yarn still in the traditional off-season. For textile mills, the procurement window is extremely short, and speculative inventory buildup carries significant risk.
Polyester staple fiber (PSF) shows a more typical chain transmission. With Strait of Hormuz traffic recovering to 60% of pre-conflict levels, oil prices fell sharply, and the polyester chain entered a catch-up decline. PSF futures dropped to around 6,900 yuan/ton. This directly impacts polyester-blend yarn producers, where the ability to offset falling yarn prices with lower raw material costs depends entirely on inventory management.
Viscose staple fiber tells a different story. Factory rebates are shrinking, traders are raising prices due to tight supply, and delivery bottlenecks are expected to persist. Yet downstream viscose yarn prices remain weak, with slow transactions and just-in-time buying. This upstream-strong, downstream-weak dynamic means viscose yarn mills are passively absorbing margin compression.
Yarn Market: Inventory Build-Up and Order Fragmentation
Cotton yarn continues in the off-season, with stable quotes but declining actual transaction prices. Trade channels are offering discounts to move goods, while mill inventories slowly accumulate. More concerning is the drop in downstream fabric mill operating rates and rising grey cloth inventories, with autumn/winter orders yet to materialize. Mills have shifted from cautious talk to concrete action: raw material buying is strictly on a need-to-use basis, with near-zero stockpiling willingness.
Differentiated products reveal structural divergence. Among colored spun yarns, high-count specialty items maintain stable demand, but standard grades face severe destocking pressure. Differentiated yarn mills run at full capacity but suffer from poor order continuity, with small and scattered orders dominating. Price competition is intense, squeezing margins further. Vortex spun yarns see both volume and price declines, with negotiated discounts and barely balanced production and sales. This trend toward order fragmentation and margin thinning is fundamentally changing how yarn mills organize production and set prices.
Polyester-blend yarns are in the toughest spot. With PSF prices plunging, yarn prices follow, and combined with the off-season, spot trading has further weakened. Mills have insufficient orders, rising inventory, and prices that have yet to stabilize. A negative cycle has formed: falling prices → buyer wait-and-see → rising inventory → further price cuts.
Fabric Market: Destocking as Top Priority
Full-cotton grey cloth continues its off-season downturn, with slower shipments, few new orders, and rising finished goods inventory. The pressure on weaving mills is shifting from order shortages to cash flow constraints. Raw material buying is strictly just-in-time, with no stocking intent. While rational in the short term, this conservative approach risks freezing the supply chain if prolonged.
Yarn-dyed fabric markets are also slowing. Raw cotton prices fell about 300 yuan/ton, making it difficult to support yarn prices. High-count pure cotton yarn dropped about 180 yuan/ton. Fabric prices are loosening locally, with razor-thin margins. Mills remain cautious, and market confidence needs rebuilding.
Denim faces dual pressure from domestic and export markets. The 10s cotton OE yarn ex-factory price hovers around 14,600 yuan/ton, but the off-season has chilled both domestic and international demand. Orders are shrinking, mill operating rates are falling, and finished goods are moving slowly. All mills are accelerating destocking, while a strengthening U.S. dollar adds uncertainty to export prospects. Industry players are closely monitoring trade dynamics.
Practical Recommendations
For Buyers - Adopt small-lot, frequent procurement for raw materials; avoid bulk stocking during the current volatile period for cotton and PSF. - Monitor viscose staple fiber supply tightness; if delivery constraints persist into August, consider forward contracts for some volume, but only against confirmed downstream orders. - Prioritize fabric suppliers with low inventory pressure and ability to handle small, quick-turn orders to reduce your own inventory risk.
For Exporters - Track the U.S. dollar index and major export market exchange rates closely; the current strong dollar cycle puts pressure on RMB-denominated export prices. - For denim and other export-sensitive items, negotiate price adjustment mechanisms with clients in advance to avoid order losses from raw material swings. - Monitor the impact of Middle East geopolitics on crude oil, which directly affects PSF and polyester-blend product costs.
This destocking cycle differs from past ones: the cost transmission chain is broken, seasonal demand recovery is absent, and export uncertainties are mounting. Companies must shift from passive waiting to active management of inventory cycles and order structures to preserve cash flow during this trough.