In the first half of 2026, China's cotton textile market diverged from its previous synchronized trend, showing structural differentiation between domestic and export markets, as well as among product categories. While textile exports remained stable, import yarns and chemical fiber substitution are squeezing mid-to-low-end markets, reshaping profit distribution along the supply chain.
Widening Price Spreads Reshape Raw Material Flows
The most significant change came from the raw material side. International cotton prices remained weak, while domestic prices held firm, widening the price spread to multi-year highs. This directly altered procurement logic: domestic mills turned heavily to imported cotton, with Brazilian cotton becoming the top source. Meanwhile, low-cost yarns from Vietnam, India, and Indonesia flooded into China, squeezing the mid-to-low-end yarn market.
This two-way flow—rising imports of both cotton and yarn—means the domestic cotton textile chain is undergoing deep resource reallocation. Domestic yarns are being pushed toward high-end, differentiated products, while the lower end is gradually taken over by imports.
Chemical Fiber Substitution Accelerates
Another key signal is the widening spread between cotton and polyester staple fiber. When cotton costs more relative to chemical fibers, downstream weaving mills tend to increase the share of polyester in fabric blends to reduce costs. This substitution is already visible in apparel fabrics and home textiles, especially in fast fashion and mass-market segments.
Accelerating substitution means cotton's share in textile raw materials may further shrink. For cotton mills, this is not just a price competition issue but a structural upgrade imperative—without moving toward high-count, high-density, or functional yarns, they risk being marginalized.
Global Trade Reconfiguration and Diminishing Southeast Asian Dividends
The global cotton textile trade landscape changed notably in the first half. Vietnam, Bangladesh, and other traditional exporting countries saw significant order declines, with both cotton imports and garment exports falling. This contrasts sharply with China's stable export performance. The domestic chain's comprehensive advantages in quality, delivery, and supporting capabilities sustained its competitiveness amid weak global demand.
Notably, global cotton trade leverage is shifting. Brazilian cotton exports are rising steadily, while those from the U.S. and India are contracting. This will influence future pricing mechanisms and trade flows.
New Season Production Expectations Intensify Bull-Bear Battle
As the crop year transitions, market focus shifts to new season production. Global output expectations are down, providing potential support for cotton prices in H2. However, domestic weaving demand remains weak, and spinning output has slowed, limiting near-term raw material consumption.
This supply-demand tug-of-war makes H2 price trends highly uncertain. Buyers must hedge against both price hikes from output cuts and price drops from weak demand.