In the first half of 2026, China's cotton textile industry has moved away from homogeneous competition into a phase of deep differentiation. The core signal is the widening domestic-foreign cotton price spread, surging import yarn, and accelerating fiber substitution, forcing the industry to shift from scale expansion to refined operations.
Trade Pattern Reshaped: Brazilian Cotton Rises, Southeast Asian Orders Shrink
Significant shifts have occurred in the global cotton textile trade landscape in H1. According to China Customs data, Brazilian cotton, leveraging price and supply stability, has replaced US cotton as the top import source for domestic mills. Meanwhile, cotton imports in Southeast Asian countries like Vietnam and Bangladesh declined year-on-year, with finished garment exports dropping sharply—indicating that weak overseas consumption has transmitted upstream, pressuring the region's textile chain operations.
Yarn trade has formed a "two-way flow" pattern: Southeast Asia and South Asia export low-cost cotton yarn to China using low-cost spinning capacity, while China leverages its weaving and garment processing advantages to fulfill global orders. This reinforces the division of labor between China and foreign countries, where complementarity and competition coexist.
Price Divergence Intensified: Import Yarn Hits Mid-Low End, Fiber Substitution Gains Traction
International cotton prices have remained weak, while domestic prices stay relatively firm, widening the price spread and enhancing the cost advantage of imported raw materials. Yarn markets also diverge: domestic yarn holds firm prices based on quality and delivery speed, while imported yarn from Vietnam, India, and Indonesia continues to drop, flooding the mid-low end market and squeezing profit margins for small mills.
At the same time, the polyester-cotton spread and yarn-cotton spread have expanded, making fiber substitution economically attractive. Industry data shows downstream fabric manufacturers are adjusting raw material mixes, increasing the use of chemical fibers. If this trend persists, it will fundamentally reshape raw material demand in the cotton textile chain.
Domestic Resilience: Exports Stable, but Domestic Demand Weak
Despite weak global demand, China's textile and apparel exports remained stable in H1, with notable performance in the US market. This is attributed to the country's complete industrial chain, stable quality, and mature delivery system. However, domestic demand faces pressure: downstream weaving demand is weak, spinning production has slowed, and raw material consumption is dragging.
Southeast Asia's textile dividend is fading. Exports from Bangladesh, Turkey, and India saw year-on-year declines, prompting a reshuffle in regional competition. China, with its high industrial chain completeness and strong risk resilience, acts as a "ballast stone" for global orders.
H2 Outlook: New Cotton Output Expectations and Seasonal Recovery
As the traditional off-season ends and autumn/winter orders begin, H2 will bring a key inflection point. Expectations of a new cotton output decline provide potential support for prices, while terminal demand recovery will determine the market's trajectory.
But the divergence pattern will persist. The characteristics of price spreads, trade flows, and product structure differentiation will continue. For companies, relying solely on scale expansion and low-price competition is no longer viable.