China's cotton yarn imports in the first half of 2026 closed with a year-on-year surge of over 56%, with monthly arrivals of 170,000 tons approaching historic highs. Customs data reveals that domestic cotton yarn is losing ground in the low-to-medium count market segment, while yarn from Vietnam, India, and other origins is flowing faster into coastal weaving clusters.
Structural Drivers Behind Sustained High Imports
From January to June 2026, cumulative cotton yarn imports reached approximately 1.05 million tons, up 56.3% year-on-year. For the 2025/26 crop year (September 2025 to June 2026), total imports climbed to about 1.64 million tons, a 40% increase. This growth rate far exceeds the recovery pace of domestic cotton spinning capacity, indicating that import substitution is a structural shift rather than temporary restocking.
The core driver is the persistent inversion of domestic and international cotton prices. Global cotton prices are under pressure from production surplus expectations, while China's cotton market maintains price resilience due to quota policies and reserve adjustments, keeping domestic yarn costs high. Mills in Vietnam and India, benefiting from raw material costs indexed to the Cotlook A index, enjoy a price advantage of RMB 800-1,500 per ton on 16S-32S regular yarn varieties. This price gap directly translates into import volume growth.
Industrial Cluster Response: Shifting Procurement Logic
Weaving mills in Guangdong, Zhejiang, and Jiangsu—major cotton yarn consuming regions—are restructuring their raw material inventory strategies. The traditional preference for domestic yarn is shifting toward a dual-track system of domestic and imported yarn, with some orders entirely switching to imports. The reason is not only price but also delivery reliability: delivery times for regular yarn from Southeast Asian mills have shortened to 15-20 days, narrowing the gap with domestic inter-provincial transfers.
However, the influx of imported yarn is not without drawbacks. Batch consistency and strength indicators of imported yarn differ from domestic products, particularly in high-density fabric production, where mixing may cause defects. This means downstream mills must accept certain quality risks while pursuing cost savings, placing higher demands on quality control systems.
Transmission Effects on Spinning and Weaving
Domestic spinning mills are facing capacity utilization pressure. According to industry data, average operating rates at small and medium-sized mills in Shandong and Henan provinces dropped from 75% at the start of 2026 to around 65% in Q2, with some mills switching to differentiated products (e.g., vortex spinning, Siro spinning) to avoid price wars in regular varieties. However, the market for differentiated products is limited, making large-scale conversion impractical.
For weaving mills, ample imported yarn supply has somewhat eased raw material costs but intensified price competition for finished fabrics. Fabric buyers now explicitly request separate quotes for domestic and imported yarn, while apparel brands push cost reductions upstream. The entire industry chain's profit distribution is concentrating at the two ends—raw material importers and end brands—squeezing the processing segment's margins.
Outlook for H2 2026: Imports Likely to Stay High, Growth May Slow
Seasonally, Q3 is typically a low season for cotton yarn imports, but given the persistent domestic-international price gap and ongoing capacity expansion in Southeast Asia, monthly imports of 150,000-170,000 tons may become the new normal. Notably, Indian cotton yarn exports to China have accelerated recently, partly driven by destocking needs after India's cotton harvest. Further price cuts by Indian yarn could pose a new threat to China's low-count yarn market.
Policy adjustments also merit attention. If import quota issuance accelerates or the sliding duty rate is lowered, the price advantage of imported yarn may be partially offset by policy tools. For now, market forces are driving this import substitution cycle, and domestic yarn makers need to seek breakthroughs through product structure upgrades and cost control.