Cotton futures experienced a typical sentiment-driven fluctuation in late June. The Zhengzhou Cotton Exchange main contract briefly surged to 16,140 yuan per ton before rapidly retreating to 15,615 yuan per ton, a swing of over 500 yuan. This reflects a persistent disconnect between macro sentiment and industrial fundamentals. The US-Iran agreement briefly boosted global financial markets and external cotton prices, but domestic cotton yarn markets are in the traditional off-season, lacking substantive demand support. After speculative capital withdrew, prices quickly reverted. Currently, cotton prices are range-bound, presenting a dilemma for mills: they cannot chase highs to stockpile nor remain completely empty. Just-in-time procurement remains the primary strategy.
Unlike cotton's tug-of-war, the decline in polyester staple fiber (PSF) has been clearer. The Strait of Hormuz shipping volume recovered to nearly 60% of pre-conflict levels, oil prices fell sharply, and the geopolitical risk premium was almost fully unwound. This cost collapse directly transmitted to the polyester chain, pushing PSF futures to around 6,900 yuan per ton. Yarn containing polyester followed suit. This dual impact means lower raw material costs help margins, but persistent price weakness encourages downstream buyers to delay orders, waiting for lower prices, further dampening yarn sales. Polyester yarn mills now have insufficient orders, mostly small and scattered, with rising inventory pressure.
Viscose staple fiber (VSF) has moved independently. Tight factory supply allowed traders to raise prices, pushing VSF up steadily. However, this upstream tightness has not effectively transmitted to yarn. Viscose yarn prices are weak, with slow sales and little new business beyond essential procurement. This "raw material up, yarn down" scissors effect is squeezing viscose yarn mills' margins. If upstream tightness persists without downstream improvement, these mills may face a severe production-sales balance test.
The overall yarn market tone is "weak in both volume and price." Pure cotton yarn offers are stable but actual transaction prices are low, with traders offering discounts. Vortex spun yarn maintains a balance but with slower shipments. Colored spun yarn faces destocking pressure on regular items. Differentiated yarn mills operate at full capacity but with poor order continuity and shrinking profits. A common conclusion emerges: weak terminal demand has spread across all categories. Orders are increasingly small and scattered, with few large, long-term orders. This complicates production scheduling and inventory management, as frequent product changes reduce efficiency.
Feedback from the fabric sector confirms terminal weakness. Grey fabric sales have slowed, finished goods inventory is accumulating, and weaving mills are buying raw materials on a need-only basis with no stockpiling appetite. Yarn-dyed fabric mills have partially lowered prices, with razor-thin margins. Denim markets are sluggish both domestically and for export, with lower mill operating rates as companies rush to destock. Notably, a strengthening US dollar adds uncertainty for export-oriented denim, and exporters must monitor exchange rate impacts on order profitability.
Overall, the cotton textile industry is in a new destocking cycle. Inventory pressure cascades from raw materials to yarn to fabrics. The lack of terminal orders leaves the entire chain without upward momentum. In the short term, the off-season is likely to persist. The timing and scale of autumn/winter order releases will be key to the outlook. For companies, controlling finished goods inventory, optimizing cash flow, and flexibly adjusting product mix are pragmatic strategies to weather this period.