In June, China's cotton textile industry entered the traditional off-season, but this downturn reflects more than seasonal weakness—it signals structural divergence along the supply chain. According to industry data, pure cotton yarn output fell 1.5% month-on-month, the yarn sales rate was only 71%, and inventory days surged by 6.3 days to 23.1 days. Fabric stocks climbed to 31.7 days. Small and medium enterprises (SMEs) faced production cuts and losses, while large backbone mills maintained basic operations. This indicates an accelerating industry reshuffle, with resources concentrating among top players.
Production Contraction and Product Mix Shift
Production pace slowed notably in June. Pure cotton fabric output dropped 3.2% month-on-month, while blended and chemical fiber yarns accounted for 49.4% of total output, up 0.5 percentage points. This shift reflects downstream demand migrating toward functional and differentiated products. Pure cotton products suffered from weak orders in apparel and home textiles, whereas blended and chemical fiber products gained share due to cost advantages and functional properties. For mills, sticking solely to pure cotton will exacerbate inventory and profit pressures.
Cotton Yarn Price Game: Domestic Weakness vs. Import Impact
The average price of domestic 32-count pure cotton yarn was 23,336 yuan/ton in June, up only 0.25% month-on-month, while imported yarn averaged 22,843 yuan/ton, down 0.49%. The price gap widened to 493 yuan/ton, making imported yarn more cost-effective. This directly impacted domestic mills, especially coastal weaving factories, which turned to imports to lower costs. The narrowing price gap suggests that domestic mills are losing pricing power and are forced to offer discounts to clear inventories during the off-season.
Raw Material Restocking: Demand-Driven Structural Divergence
Despite weak end demand, cotton mill inventories rose by 21,000 tons to 868,000 tons in June. This seemingly contradictory trend reflects rational procurement strategies. The Zhengzhou Cotton Exchange's main contract twice fell to around 15,600 yuan/ton, triggering opportunistic restocking. Notably, 32% of mills increased inventories, 51% kept them unchanged, and only 17% reduced stocks. In terms of cotton mix, 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 accounted for 14.5%, down 4.9 points month-on-month but up 9.8 points year-on-year. This shows mills are substituting domestic cotton with cheaper imports, posing a long-term challenge to Xinjiang's cotton supply chain.
Sluggish End-Product Sales and Cash Flow Pressure
The yarn sales rate slipped from 72% in May to 71% in June, while fabric inventory days increased by 4 days to 31.7 days. With no clear improvement in end orders, weaving and garment factories lack restocking appetite, forcing yarn and fabric mills to cut prices aggressively. This 'price-for-volume' strategy temporarily eases inventory pressure but further compresses margins, especially for cash-strapped SMEs, potentially widening losses.
Temporary Export Recovery Cannot Mask Weak Domestic Demand
In June, textile and apparel exports grew 7.2% year-on-year and 14.3% month-on-month, with textile exports up 12.2% and apparel up 3.2%. However, first-half cumulative apparel exports still declined 0.7% year-on-year, indicating limited external support, mainly from order deliveries and improved trade environment. Long-term uncertainties persist in overseas markets, so firms should not rely solely on exports.