Cotton yarn prices have hovered near their one-year high for over four months, but the pace of terminal order transmission has not kept up with the pace of raw material price increases.
High Prices and Cost Game
According to industry public data, on July 16, 2026, the benchmark price of cotton yarn 32S stood at 24,725 yuan per ton, flat compared to the beginning of the month. However, compared to the low point of 23,175 yuan per ton in the same period of 2025, the cumulative increase has reached 6.69%. Looking at the annual fluctuation range, the price has moved between 23,175 yuan and 24,875 yuan per ton, and the current level is only 150 yuan away from the peak, representing a typical high-level narrow-range consolidation pattern.
The annual average price of 23,841.46 yuan per ton indicates that prices have remained at a relatively high level for most of the year. On the upstream cotton side, weather factors in Xinjiang and the rhythm of reserve cotton releases jointly support cotton prices, making cotton yarn costs difficult to ease. Meanwhile, downstream weaving and garment companies, facing high raw material prices, generally adopt a 'buy-as-needed' strategy, unwilling to build large inventories, resulting in small-lot, just-in-time transactions in the cotton yarn market.
Profit Squeeze in the Supply Chain
This combination of 'high costs, weak demand' is compressing profit margins in the spinning sector. For small and medium-sized spinning mills, the capital occupation for raw material procurement has increased, while product price increases are met with downstream resistance. Some companies have proactively reduced operating rates to control inventory.
From the perspective of regional industrial belt reactions, cotton spinning clusters such as Nantong in Jiangsu and Weiqiao in Shandong have shown differentiation: large enterprises, supported by long-term contract orders, maintain operating rates above 70 percent; while small and medium-sized enterprises have generally reduced rates to 50-60 percent, with some even choosing phased production halts for maintenance. This divergence indicates that the market is accelerating its shakeout in the high-price range.
- Cost side: Cotton prices remain firm with no significant expectation of a sharp decline in the short term.
- Demand side: Foreign trade orders have not shown clear signs of recovery, affected by overseas inventory cycles.
- Inventory side: Yarn social inventory is at a moderate level, but grey fabric inventory at weaving mills has accumulated somewhat.
Q3 Outlook
Entering the traditional off-season for textiles in the third quarter, factors such as high temperature-related power curbs and downstream factory holidays will suppress cotton yarn demand. However, considering raw material cost support and the price-fixing willingness of some spinning mills, the probability of a sharp short-term decline in cotton yarn prices is low. A more likely path is continued high-level range-bound consolidation, awaiting signals from the start of autumn orders.
For foreign trade companies, exchange rate fluctuations and the pace of overseas terminal consumption recovery are two key variables to watch. If the replenishment demand from Europe and the US materializes in Q4 as expected, cotton yarn prices may retest the year's high; conversely, they may face a phased correction to near 24,000 yuan per ton.