Cotton prices experienced a roller-coaster ride in late June, with the Zhengzhou futures contract peaking at 16,140 yuan per ton before retreating to 15,615 yuan per ton—a swing of over 500 yuan. This volatility reflects a tug-of-war between macro sentiment and industry fundamentals: the US-Iran agreement briefly lifted external markets, but the traditional off-season in cotton yarn quickly dampened speculative enthusiasm. For textile mills, this makes raw material procurement timing extremely tricky, and just-in-time purchasing has become the dominant strategy, with most companies reluctant to build inventories.
Triple Divergence in Raw Materials
Cotton, polyester staple fiber, and viscose staple fiber are following distinctly different trajectories. Cotton has returned to range-bound trading after the macro sentiment faded, lacking clear catalysts and stuck between resistance and support. Polyester staple fiber, on the other hand, has been dragged down by a sharp decline in crude oil prices, as the Strait of Hormuz shipping volume recovered to nearly 60% of pre-conflict levels. The stripping of geopolitical risk premiums triggered a correction in the polyester chain, with short-fiber futures falling to around 6,900 yuan per ton. Viscose staple fiber remains relatively firm, with factories reducing discounts and traders raising prices due to tight supply—a situation expected to persist in the near term.
This divergence in raw material prices is directly transmitted downstream to the yarn market. Pure cotton yarn prices appear stable on the surface, but traders are offering discounts, keeping actual transaction prices low. Yarns containing polyester are under pressure from falling raw material costs, with prices yet to stabilize and orders mostly small and scattered. Viscose yarn is experiencing a cost-price inversion: viscose staple fiber prices are rising, but viscose yarn prices are weakening, and sales are slow.
Destocking Becomes the Industry-Wide Theme
From yarn to fabric, rising finished goods inventories are the most pressing issue. Cotton yarn mills are seeing inventories slowly build, downstream weaving is slowing, and grey fabric stocks are accumulating. Yarn-dyed fabric companies are facing price erosion on some products, with razor-thin margins. The denim sector is seeing sluggish domestic and export markets, with all players accelerating destocking. The grey fabric market is also slowing, with orders limited to small, quick-turnaround batches.
Notably, even differentiated yarn mills, which operate at full capacity, are struggling with order continuity. New orders remain small and scattered. While product inventories have not increased, price competition is fierce, squeezing profits further. This shows that even high-barrier niche segments cannot escape the broader demand contraction. Companies are generally cautious, with some sectors showing a split between cautious optimism and outright pessimism.
External Trade Environment and Price Expectations
Feedback from denim mills highlights a variable often overshadowed by the off-season: a strengthening US dollar. This adds extra pressure on export-oriented textile firms. Currency fluctuations erode already thin margins, and uncertainty in the export environment forces companies to juggle both export orders and domestic sales. Currently, export orders are shrinking, compounding the domestic off-season slowdown.
On the pricing front, raw cotton prices have fallen by about 300 yuan per ton in the past month, and high-count pure cotton yarn prices have dropped by about 180 yuan per ton. Yet downstream buyers are not stocking up on the dip. Just-in-time, need-based purchasing is the norm, meaning the price transmission mechanism is almost broken: upstream price cuts fail to stimulate downstream restocking and instead reinforce a wait-and-see attitude.