The profit transmission mechanism of the cotton textile chain is undergoing a severe stress test. According to the latest June survey report from the China Cotton Association, the traditional off-season has deepened, with the entire industrial chain slowing down significantly. SME losses and production cuts have expanded, and finished goods inventories have surged to a temporary peak.
Production side contracts broadly, SMEs bear the brunt
June production data reveals clear structural divergence. Pure cotton yarn output fell 1.5% month-on-month, while pure cotton fabric output dropped 3.2%. SMEs, burdened by inventory accumulation and profit inversion, have seen a notable increase in production cuts and shutdowns. In contrast, large backbone enterprises have managed to maintain just-in-time production. This divergence signals an accelerated market clearing process, squeezing the space for smaller players.
Product mix shifts also reflect downstream price sensitivity. The share of pure cotton yarn fell to 50.6%, down 0.5 percentage points, while blended and chemical fiber yarns rose to 49.4%. Mills are actively adjusting their product structures to hedge against cotton price volatility.
Price battle intensifies, imported yarn pressures domestic mills
Domestic cotton yarn prices showed a 'first rise then fall' pattern in June. The monthly average edged up 59 yuan/ton to 23,336 yuan/ton, but the late-month decline was pronounced. Weak demand limited mills' pricing power, forcing many to offer discounts and squeezing margins further.
The divergence between domestic and imported yarn prices has directly impacted local mills. Imported 32s pure cotton yarn averaged 22,843 yuan/ton, down 112 yuan/ton month-on-month, versus the domestic average of 23,336 yuan/ton. The widening gap enhances the cost-effectiveness of imported yarn, exerting sustained pressure on the domestic market. For foreign trade companies, this means a need to more precisely match customer requirements for both price and quality.
Raw material inventory structure shifts, Xinjiang cotton reliance rebounds
Frequent cotton price fluctuations in June saw the Zhengzhou Cotton Futures主力 contract dip to around 15,600 yuan/ton twice. These lows triggered concentrated just-in-time replenishment by mills. By end-June, cotton industrial inventory stood at 868,000 tons, up 21,000 tons from the previous month. However, this replenishment did not change overall cautious sentiment—51% of mills kept inventory unchanged, and only 32% increased stocks.
In terms of cotton sourcing, Xinjiang cotton's share rebounded 5 percentage points to 79.1%, while imported cotton fell 4.9 percentage points to 14.5%. This shift reflects stronger preference for domestic cotton, partly due to volatility in imported cotton prices and trade uncertainty.
Finished goods inventory pressure hits new high, cash recovery becomes priority
Sluggish offtake is the most immediate problem. Yarn sales rate fell to 71%, down 1 percentage point. By month-end, yarn inventory days reached 23.1, up 6.3 days from May; fabric inventory days hit 31.7, up 4 days. Rapid inventory accumulation forced deeper price cuts, with discount selling for cash recovery becoming the norm.
By product, 32S and 40S medium-count yarns maintained relatively stable demand, while high-count and low-end yarns saw weakness. This indicates downstream weaving and garment factories are also compressing costs, maintaining demand for mid-range products but reducing purchases of high-value and low-end items.
Export rebound is temporary, cannot reverse weak domestic demand
June textile and apparel exports showed strong performance: total exports reached $29.271 billion, up 7.2% year-on-year and 14.3% month-on-month. Textile exports grew 12.2% year-on-year, while apparel grew 3.2%. This growth was driven by concentrated delivery of earlier overseas orders and a temporary improvement in the Sino-US trade environment.
However, first-half apparel exports still fell 0.7% year-on-year, indicating limited external support. The export rebound is a short-term booster, unable to fundamentally resolve the core contradiction of weak domestic demand. With fall/winter orders yet to start, the industry is likely to remain weak in the near term.