Cotton Textile Industry Deepens Divergence in June: Large Mills Hold the Line, Small Mills Cut Output and Destock

In June 2026, the chill of the traditional off-season in the cotton textile industry was not dispelled by the temporary recovery in exports. The latest survey from the China Cotton Association reveals a more complex industrial landscape: the entire chain is slowing, but divergence among enterprises is spreading from production pace to inventory management and pricing strategies. Large mills can barely maintain just-in-time production, while small and medium mills, squeezed by inventory buildup and margin inversion, are increasingly resorting to output cuts and even shutdowns. This is no longer an isolated case but an emerging industry norm.

End Demand Stalls Amid Inventory Pressure

The core contradiction of the off-season lies in demand. Apparel and home textile end-users have frozen their purchasing intentions, with downstream weaving and garment factories essentially halting centralized stocking. This has severely slowed the shipment of yarn and grey fabric. The data clearly reflects this pressure: the June yarn sales rate was only 71%, down 1 percentage point from May. By month-end, yarn inventory at mills had surged to 23.1 days, a sharp increase of 6.3 days month-on-month; grey fabric inventory reached 31.7 days, up 4 days. This means that at current shipment rates, mills would need over a month to clear their grey fabric stock, intensifying cash flow pressure.

Price Competition and Structural Divergence

Against the backdrop of weak demand, yarn prices lack upward momentum. The average price of domestic 32s combed cotton yarn in June was 23,336 yuan/ton, up only 0.25% month-on-month, though still 14.84% higher year-on-year. Notably, the average price of imported 32s combed cotton yarn fell 0.49% month-on-month to 22,843 yuan/ton, further enhancing its cost advantage. The price gap between domestic and imported yarn narrowed to about 500 yuan/ton, intensifying competition for domestic mills. To maintain cash flow, mills were forced to offer discounts and promotions, escalating price wars.

Structural divergence in production is equally striking. While pure cotton yarn output fell 1.5% month-on-month, the combined share of blended and chemical fiber yarns rose to 49.4%, up 0.5 percentage points. This indicates that more mills are shifting product mix toward blended or synthetic fibers to preserve margins in the face of cost pressure. Pure cotton fabric output fell 3.2% month-on-month, further confirming weak demand for cotton-based products.

Inventory Strategy: Just-in-Time Replenishment and Structural Shift

Despite sluggish end demand, cotton prices twice dipped to around 15,600 yuan/ton in June, triggering spot buying by some mills. By end-June, on-hand cotton inventory stood at 868,000 tons, up 21,000 tons from May; total disposable inventory was 987,800 tons, up 13,000 tons. Among surveyed mills, 32% increased inventory, 51% kept it stable, and only 17% reduced stock. This seemingly contradictory restocking behavior actually reflects mills' desire to lock in low-cost raw materials rather than any optimism about future demand.

A notable shift in cotton consumption structure is the rising share of imported cotton. Xinjiang cotton accounted for 79.1% of total consumption, up 5 percentage points month-on-month but down 10 points year-on-year; imported cotton's share rose to 14.5%, down 4.9 points month-on-month but up 9.8 points year-on-year. This is partly due to the improved cost-effectiveness of imported cotton, but also suggests that some mills are proactively adjusting their raw material sources to meet export requirements or hedge against trade risks.

Export Recovery: A Temporary Boost Cannot Cure Domestic Weakness

June export data appeared robust: textile and apparel exports reached $29.271 billion, up 7.2% year-on-year and 14.3% month-on-month. However, this growth was largely driven by the concentrated delivery of earlier export orders and a temporary improvement in the Sino-US trade environment. For the first half of the year, cumulative textile and apparel exports were only $145.96 billion, up 1.4% year-on-year, with apparel exports alone falling 0.7% to $72.96 billion. The export rebound is more a release of pent-up orders than a trend reversal in external demand. For most small and medium mills focused on the domestic market, the positive effects of export recovery are limited, and weak domestic demand remains the primary operational challenge.

Practical Recommendations

For Buyers - Current yarn prices are at a cyclical low, and imported yarn offers clear cost advantages. Consider increasing the proportion of imported yarn in purchases to lower raw material costs. - Monitor Zhengzhou Cotton futures volatility. Build positions gradually when prices fall below 15,600 yuan/ton to lock in low-cost raw materials, but avoid large one-time purchases to prevent inventory devaluation risks. - Prioritize cooperation with large, well-capitalized mills. Their production stability ensures better delivery reliability and quality consistency, reducing the risk of supply disruptions due to output cuts or shutdowns at smaller mills.

For Export Enterprises - Take advantage of the current window of improved Sino-US trade relations to actively pursue overseas orders, especially from Southeast Asia and Europe. However, remain vigilant about exchange rate fluctuations and trade policy changes. - For export orders, consider substituting blended or chemical fiber products for some pure cotton items to reduce costs and better compete with imported yarn. - Strictly manage finished goods inventory. Shorten order-to-delivery cycles to avoid cash flow tie-ups caused by slow off-season shipments.