Cotton prices have staged a roller-coaster ride in recent weeks. The Zhengzhou Cotton Futures主力合约 briefly surged to 16,140 yuan per ton before retreating to 15,615 yuan, an amplitude of over 500 yuan. The downstream cotton yarn market remains in the traditional off-season, lacking substantial industrial drivers, leaving prices trapped in a narrow range. This volatile pattern means that now is not an ideal time for buyers to stockpile. The prevailing strategy remains procurement on demand and just-in-time purchasing.
Raw Material Divergence Intensifies, Cost Transmission Fails
The divergence among raw materials is more noteworthy than the price swings themselves. Cotton prices were briefly lifted by external market sentiment but quickly fell back, indicating that domestic demand simply cannot sustain such gains. Polyester staple fiber saw a sharp decline as crude oil prices dropped after the Strait of Hormuz shipping volume recovered to nearly 60% of pre-conflict levels, squeezing out the geopolitical risk premium. Viscose staple fiber was the only variety to buck the trend, with mills reducing rebates and traders raising prices amid tight supply, a situation expected to persist in the near term.
The contrasting price trajectories of the three raw materials reveal a breakdown in the transmission mechanism along the cotton textile chain. Changes in upstream supply (geopolitics, oil volatility, plant maintenance) are failing to pass through to downstream yarn markets because end-user demand is simply too weak. Spinners generally refuse to follow raw material price increases and avoid building inventories, further capping the upside for raw materials.
Yarn Markets Under Pressure, Inventory Becomes the Biggest Pain Point
Data from the 127th survey by the China Cotton Textile Association shows that virtually all yarn categories are in an off-season slump. In the pure cotton yarn segment, traders are offering discounts to move goods, with actual transaction prices staying low and mill inventories still slowly accumulating. Vortex-spun yarn, color-spun yarn, differential yarn, polyester yarn, and viscose yarn all face order shrinkage and slower shipments.
A warning sign: differential yarn mills are running at full capacity, but order lead times are only about one month, and new orders are predominantly small and scattered. This suggests mills are not running full due to robust orders, but rather to spread fixed costs and retain workers. If follow-up orders dry up, full production will only accelerate inventory build-up.
More direct pressure comes from the grey fabric segment. Shipments of pure cotton grey fabric have slowed markedly, with weaving mills adopting a just-in-time procurement approach and showing little willingness to build stocks. Yarn-dyed fabric mills have seen product prices soften, squeezing profit margins. Denim mills face a cold market both domestically and internationally, with a strengthening US dollar adding uncertainty to export prospects.
When Will the Destocking Cycle End?
The current phase is a textbook 'active destocking' cycle. Mills are cutting prices, offering discounts, and reducing output to liquidate finished goods inventories, but the pace of demand erosion is faster, limiting the effectiveness of these efforts. Historical experience suggests destocking cycles typically last two to three quarters and are often accompanied by a wave of capacity elimination.
For textile companies, the core challenge today is not raw material prices but where orders will come from. Fall/winter orders have yet to materialize, export markets face dual uncertainties from exchange rates and geopolitics, and domestic consumer confidence is recovering slowly. In this environment, the most pragmatic moves are to control cash flow, reduce raw material inventory, and shorten payment terms.