The cotton textile industry is undergoing a typical adjustment phase marked by demand contraction and cost divergence. According to the latest survey by the China Cotton Textile Association, raw material markets showed clear divergence in July: cotton prices retreated after speculative enthusiasm faded, polyester staple fiber fell sharply due to crude oil price collapse, while viscose staple fiber firmed on tight supply. This asynchronous movement at the raw material end is transmitting downstream to yarn and fabric sectors, intensifying inventory pressure and margin squeeze across the supply chain.
Raw Material Divergence: Cotton Ranges, Polyester Pressured, Viscose Tight
Cotton experienced a "rise then fall" cycle. Zhengzhou futures hit a high of 16,140 yuan/ton before dropping to 15,615 yuan/ton. The initial rally was driven by external sentiment—the US-Iran agreement boosted global grain markets—but this macro premium proved unsustainable. Once speculative enthusiasm cooled, the traditional off-season in cotton yarn quickly reasserted itself, with limited industrial buying support, pushing prices back into a range-bound pattern. For textile mills, this means greater difficulty in timing raw material purchases: chasing rallies risks being trapped, while waiting creates uncertainty against incoming orders.
Polyester staple fiber’s trajectory is largely cost-driven. Strait of Hormuz traffic has recovered to nearly 60% of pre-conflict levels, crude oil prices have dropped sharply, and the geopolitical risk premium has almost entirely evaporated. The polyester chain began a catch-down move, with short-fiber futures falling to around 6,900 yuan/ton. Whether this level represents a bottom depends on downstream restocking intentions. Survey feedback shows blended yarn trading has slowed, with buyers purchasing only for immediate needs, suggesting further downside risk for polyester staple fiber.
In contrast, viscose staple fiber presents a tight supply picture. Mills have reduced rebate concessions, and traders have raised prices due to delivery constraints. This supply-side tightness is unlikely to ease in the near term, but downstream viscose yarn sales are also under pressure, making price transmission difficult. Survey data shows viscose yarn prices weakening and sales slowing. This means the strength in viscose staple fiber is more of a supply story than demand-driven, and prices are likely to hold at high levels without strong upward momentum.
Yarn Transmission: Off-Season Orders Shrink, Inventory Creeps Up
Raw material volatility is transmitting to the yarn segment, characterized by "lower volumes and weaker prices," a classic off-season pattern. Pure cotton yarn prices are broadly stable, but traders are widely offering discounts, keeping actual transaction prices low. Mill finished goods inventories are still slowly accumulating, downstream weaving operating rates are declining, grey fabric stocks are rising, and autumn/winter orders have yet to materialize. This "between seasons" state means cotton yarn prices lack upward impetus in the near term, and cash flow pressure on mills will continue to intensify.
The vortex spun yarn and colored spun yarn segments also face weak demand. Vortex spun viscose and polyester-viscose yarns are seeing lower volumes and prices, with mills mainly producing small orders to maintain production-sales balance. Colored spun yarn conventional varieties are under heavy destocking pressure, with only high-count differentiated products showing relatively stable demand. Differentiated yarn mills are running at full capacity but face poor order continuity, with new orders dominated by small and scattered lots, further squeezing profit margins. Polyester and viscose yarns, affected by falling raw material costs and cautious downstream buying, have yet to stabilize, with market sentiment overwhelmingly wait-and-see.
The overall picture across the yarn segment is: fewer orders, rising inventories, and thin margins. Mills are universally adopting a "produce-to-order" strategy, buying raw materials only for immediate needs, with extremely low restocking willingness. This cautious sentiment itself further suppresses demand recovery, creating a negative feedback loop.
Fabric Pressure: Operating Rates Fall, Export Uncertainty Rises
The off-season effect is even more pronounced in the fabric market. Grey sheeting is weak, with slowing shipment pace, orders mainly for small-lot quick-response runs, and rising finished goods inventory. Weaving mills are buying raw materials on an as-needed basis, with no stockpiling intention. The yarn-dyed fabric market is also sluggish, with raw cotton prices down about 300 yuan/ton, high-count pure cotton yarn down about 180 yuan/ton, and fabric product prices loosening in some areas, leaving razor-thin margins.
The denim segment faces dual pressure from domestic and export markets. The ex-factory price of 10s pure cotton OE yarn remains range-bound at around 14,600 yuan/ton, but the industry is in a traditional off-season, with both domestic and export markets quiet. Orders are shrinking, mill operating rates are falling, and finished goods are not moving. More concerning, the strengthening US dollar index creates uncertainty for export conditions. For denim exporters, exchange rate volatility and shrinking overseas orders are forming a combined shock. Mills are accelerating destocking, but slow shipments mean this process may take longer than expected.