China's cotton yarn imports hit 170,000 tons in June 2026, flat month-on-month but surging 54.2% year-on-year, according to customs data. This marks the third consecutive month above the 170,000-ton threshold, signaling an accelerating penetration of imported yarn into the domestic market.
Record-Breaking Volumes
Cumulative imports for the first half of 2026 reached 1.05 million tons, up 56.3% YoY. For the 2025/26 cotton season (September 2025 to June 2026), the 10-month total stood at 1.64 million tons, a 40.2% increase. This growth far outpaces domestic yarn output expansion, indicating a rising share of imports in China's overall yarn consumption.
Key Drivers: Price Spreads and Structural Mismatch
The core driver is the persistent inverted price spread between domestic and international cotton. Since H2 2025, international cotton prices have been suppressed by bumper crop expectations in major producers, while Chinese cotton remained supported by policy and steady mill demand. This created a 10-15% cost advantage for imported yarn, directly boosting mill profitability and spurring trader orders.
Structurally, China's spinning sector is undergoing a 'low-end exit'. Small and medium mills are shutting down due to environmental and labor costs, while high-end capacity shifts to specialty yarns. This leaves a supply gap in standard counts (Ne 32, Ne 40) that mills in Vietnam, India, and Pakistan readily fill, with lead times as short as 15-20 days.
Downstream Absorption: Orders Recover but Inventories Build
The influx of imported yarn is a double-edged sword for weaving clusters in Guangdong, Zhejiang, and Jiangsu. On one hand, ample supply supports export order fulfillment, especially for garment OEMs serving Southeast Asian and Western markets that benefit from cheaper inputs.
On the other hand, end-consumer demand recovery lags. In Q2 2026, domestic apparel retail grew only 3-4% YoY, while textile export growth decelerated to single digits. A significant portion of imported yarn is therefore not consumed but stored as inventory. By end-June, warehouse occupancy in major hubs like Foshan (Guangdong) and Lanxi (Zhejiang) exceeded 80%, with some grades facing overflow.
H2 Outlook: Currency and Policy Games
Entering July, RMB exchange rate volatility adds uncertainty to import costs. A sustained depreciation could erode the price advantage of imported yarn, potentially dampening trader appetite for forward orders. Meanwhile, national reserve cotton auctions and the issuance of sliding-duty quotas will directly affect the relative pricing of imported vs. domestic yarn.
On the demand side, Q3 is traditionally a slack season. Additionally, ongoing Western concerns over Xinjiang cotton may force some exporters to increase imported yarn usage to meet customer requirements—a non-market factor that could keep import volumes elevated, albeit with more intense price negotiations.