Raw material prices are rising, while finished product prices are falling—this two-way squeeze has become the most pressing profit challenge for the textile industry in the first half of the year. Data released by the National Bureau of Statistics on July 9 shows that June PPI rose 4.1% year-on-year, but the more striking story lies in the sharp divergence within the industrial chain: upstream production materials surged 5.5%, while downstream consumer goods fell 0.9%, with apparel ex-factory prices dropping 1.0%.
Upstream Cost Pressure: A Triple Hit from Chemicals, Energy, and Textile Raw Materials
On the procurement side, textile manufacturers face three layers of cost pressure. Textile raw material purchase prices rose 3.3% year-on-year, with a further 0.7% monthly increase, pushing up costs for chemical fibers, cotton, and recycled fibers. More critically, chemical raw material purchase prices jumped 11.5% year-on-year, directly impacting costs for polyester, nylon, auxiliaries, and functional coatings. Fuel and power purchase prices climbed 11.8%, meaning energy costs for weaving, dyeing, and drying are also rising sharply.
These three cost factors combined mean that unit production costs for textile manufacturers have been systematically elevated. For small and medium enterprises focused on chemical fiber and blended products, the rise in chemical and energy costs is nearly impossible to absorb internally.
Downstream Pricing Dilemma: Why Are Garment Prices Falling?
In stark contrast to upstream strength, the end market shows pronounced price weakness. Apparel ex-factory prices fell 1.0% year-on-year, with weak pricing for garments and home textiles. This is not simply a demand issue—the core reason is ample supply in the consumer market and fierce competition in apparel and footwear categories. Brands and channels hold strong bargaining power over factory prices, making it difficult for manufacturers to pass on raw material cost increases.
This 'upstream up, downstream down' profit squeeze reflects an imbalance of power in the textile chain. Upstream raw material and chemical suppliers are concentrated and have strong pricing power, while downstream manufacturing is highly fragmented and competitive, causing cost pressure to accumulate in the middle.
What the PPI Structure Reveals
Looking at PPI sub-indices, mining surged 16.5%, raw materials rose 8.6%, but processing industries only gained 3.0%. This confirms that price increases are concentrated at the resource end, with limited pass-through to processing. For textiles, this means even as cotton, polyester, and auxiliaries rise, weaving, dyeing, and garment processing cannot raise prices correspondingly.
Cumulative PPI in H1 was up 1.5%, while purchase prices rose 2.4%, creating a persistent gap. This gap is the direct measure of profit erosion for textile manufacturers.
Short-Term and Long-Term Responses
In the short term, companies rely on order scale to dilute fixed costs and process optimization to reduce unit energy consumption. But this has limits—when raw material increases exceed a certain threshold, scale effects cannot offset rising costs.
Long-term, the path points to product structure upgrades. Industry data shows that differentiated functional fabrics, high-end specialty fibers, and green low-carbon products command stronger pricing power. In textile clusters like Keqiao and Shengze, some companies are shifting capacity toward higher value-added categories to escape the 'hard to raise, easy to cut' pricing trap.