June data for the cotton textile industry reveals a colder-than-expected off-season. The entire supply chain slowed, with small and medium-sized mills facing production cuts and shutdowns, while finished goods inventories climbed to multi-year highs. Yarn sales rates dropped to 71%, and grey fabric inventory reached 31.7 days, meaning over a month of output sat in warehouses, intensifying cash flow pressure.
The Dual Logic of Weak Domestic Demand and Export Divergence
Weak end-user demand remains the core issue. Orders for apparel and home textiles decreased, with downstream weaving and garment factories showing no desire for concentrated restocking, directly slowing yarn and grey fabric shipments. Structurally, 32S and 40S medium-count yarns performed relatively well, but high-count and low-end yarns saw weak demand, reflecting polarization in consumption—brand orders contracted, and the low-end market lacked support.
Exports, however, tell a different story. In June, textile and apparel exports reached $29.271 billion, up 7.2% year-on-year and 14.3% month-on-month. Textile exports hit $13.522 billion, up 12.2% year-on-year, while apparel exports were $15.749 billion, up 3.2% year-on-year. This growth was mainly driven by concentrated delivery of earlier overseas orders and a temporary improvement in China-U.S. trade relations.
Yet the sustainability of the export recovery is questionable. 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 down 0.7% year-on-year. The support from external demand is limited and cannot reverse the weak domestic pattern. For buyers, this means the export surge may be a short-term pulse, not a trend reversal.
The Chain of Stagnant Yarn Prices and Inventory Pressure
Yarn prices showed a pattern of rising first and then falling in June, with the average price for the month rising only 0.25%. Domestic 32S pure cotton yarn averaged 23,336 yuan/ton, up 59 yuan/ton month-on-month, while imported 32S pure cotton yarn averaged 22,843 yuan/ton, down 112 yuan/ton month-on-month, further improving its cost-effectiveness. The price gap between domestic and imported yarn turned negative, intensifying the impact of imported yarn on the domestic market.
Mills resorted to discount sales as a norm. Small and medium-sized mills, burdened by inventory accumulation and profit inversion, were forced to cut prices further to recover cash. This price war further compressed industry margins, creating a vicious cycle. Mills also adopted cautious raw material purchasing, focusing on just-in-time needs. In June, cotton industrial inventory stood at 868,000 tons, up only 21,000 tons month-on-month. Among surveyed mills, 32% increased inventory, 17% reduced it, and 51% kept it unchanged.
In terms of cotton usage structure, Xinjiang cotton accounted for 79.1%, up 5 percentage points month-on-month but down 10 percentage points year-on-year; imported cotton accounted for 14.5%, down 4.9 percentage points month-on-month but up 9.8 percentage points year-on-year. This reflects mills adjusting their raw material mix to avoid cost volatility—the long-term substitution trend of imported cotton continues, but short-term price fluctuations push mills to favor domestic cotton.
Industry Divergence and Outlook
The current cotton textile industry shows clear divergence. Large enterprises, with stable orders and stronger financial positions, maintain normal production; small and medium-sized mills face survival pressures, with production cuts and shutdowns. This divergence may accelerate during the off-season, potentially leading to increased industry concentration—the exit of some small mills will free up capacity for the post-season market.
The key variable for the future is the timing of autumn/winter orders. If orders are released in July-August, inventory pressure could ease by September; if orders are further delayed, the industry may face a longer de-stocking cycle. Given current grey fabric inventory of 31.7 days and yarn inventory of 23.1 days, even if orders recover, de-stocking will take at least 2-3 months.
For buyers, this is a window of strong bargaining power; for mills, controlling inventory risk and cash flow is more important than pursuing output.