The imported cotton yarn market is currently locked in a rare stalemate. In early July, despite ICE cotton futures rebounding above 80 cents/lb and improved month-on-month textile and apparel export data from Southeast and South Asian countries for May-June, FOB/CNF/CIF offers for cotton yarn remained largely stable, with some second- and third-tier Indian, Vietnamese, and Indonesian mills even slightly lowering their forward yarn prices. This divergence between cost and pricing signals deepening disagreement across the supply chain about future direction.
Why Cotton Prices Rise but Yarn Prices Don't
From the raw material side, the continuous rebound in ICE cotton since late June should have provided cost support for cotton yarn offers. However, India's S-6 spot prices experienced a 'down then up' pattern during the same period, and CCI's auction floor prices were adjusted only modestly after a stable period, keeping mills' raw material costs within a narrow range. Meanwhile, Indian mills prefer to purchase medium-to-high grade domestic cotton from the 2025/26 season, reducing reliance on expensive imported cotton and partially offsetting the cost pressure from rising international prices.
In Vietnam, after ICE cotton returned to 80 cents/lb, some large mills showed stronger willingness to raise offers for C32S and above ring-spun yarn and high-count OE yarn. But the increased volatility in international cotton, combined with rivals in India and Pakistan keeping their offers unchanged, led Vietnamese mills to adopt a wait-and-see approach. This 'want to raise but dare not' mentality reflects the fear of losing market share in an environment where demand has yet to materially recover.
Pakistan presents a different picture. Domestic cotton prices there are rising steadily, and the 2026/27 new crop is coming to market in increasing volumes, with mills buying relatively actively. But notably, since late June, demand for imported cotton in Pakistan has remained weak, and the share of domestic cotton in yarn production has increased significantly. Industry data suggests that using domestic cotton may affect yarn quality metrics such as strength, CV value, and stability. This is a warning signal for Chinese fabric mills that rely on Pakistan's siro-spun yarn.
Downstream Procurement: Inquiries Rise, but Transactions Remain Cautious
On the demand side, fabric mills and traders in coastal regions have increased inquiries and procurement compared to late June. This shift is driven by two factors: first, sharp declines in crude oil, PTA, and polyester staple fiber prices have led to larger reductions in offers for polyester-cotton yarn from Vietnam and Indonesia, improving their cost-effectiveness; second, some traders and mills believe current offers have hit a temporary bottom and are starting to build inventory for third-quarter orders.
However, the rise in inquiries has not translated into a significant increase in transactions. Trading companies in Guangdong, Jiangsu, and Zhejiang report that end-user orders remain fragile, and downstream mills generally maintain a hand-to-mouth buying strategy, unwilling to build high inventories. Traders are also cautious, preferring to wait for clearer signals from major Indian and Vietnamese mills before committing.
Differentiated Responses Across Industrial Clusters
Reactions to the current market vary across different industrial clusters. In Guangdong's Foshan and Zhejiang's Shaoxing, which focus on mid-to-high-end knitted fabrics, interest is concentrated on Vietnamese C32S and above high-count yarns, with some companies making exploratory inquiries but actual purchases limited to urgent needs. In Nantong (Jiangsu) and Weifang (Shandong), which are hubs for home textiles and woven fabrics, attention is on Pakistan's siro-spun and OE yarn prices, with vigilance about quality risks from domestic cotton substitution.
Intermediaries in Fujian's Changle cluster report that the stabilization of current offers has intensified the bargaining standoff. Sellers hope to use ICE cotton's rebound to hold prices, while buyers leverage weak demand to demand discounts. How this stalemate breaks will depend on the actual landing of downstream orders in the third quarter.