China imported 1.05 million tons of cotton yarn in the first half of 2026, a year-on-year surge of 56.3%, according to the General Administration of Customs. June alone saw 170,000 tons, flat month-on-month but up 54.2% year-on-year. This marks the fastest import growth in nearly a decade, raising questions about whether it reflects genuine downstream demand or speculative stockpiling.
The driving force behind this import wave is a mix of real demand and inventory building. Downstream weaving mills operated at 65%-70% capacity from March to May, about 8 percentage points higher than the same period in 2025, supported by recovering exports to the U.S. and Europe and transshipment demand from Southeast Asia. However, import growth (56.3%) far outpaced fabric output growth (around 12%), suggesting surplus yarn is piling up in warehouses. Traders capitalized on low global cotton prices and a favorable exchange rate, with Indian and Vietnamese yarns offering a price advantage of 800-1,200 yuan per ton over domestic alternatives.
Vietnam remains the top source, accounting for 45% of imports, followed by India (22%) and Pakistan (15%). Vietnamese high-count carded yarns like C32S and C40S are increasingly displacing products from domestic mills in Shandong and Henan. The price gap between imported and domestic yarns has stayed at 200-400 yuan per ton, steering orders toward imports in weaving clusters like Shengze and Nantong.
Looking ahead, import growth may slow in the second half of 2026. If domestic cotton prices fall further after the new harvest, the price advantage of imported yarn could shrink below 200 yuan per ton, prompting some orders to return to local mills. Currency fluctuations also pose a risk: a yuan depreciation would raise settlement costs for imports, leading traders to cut new contracts. Nonetheless, total imports for the 2025/26 season (September 2025-June 2026) have already reached 1.64 million tons, up 40.2%, and the full-year total is likely to exceed 1.8 million tons. This would push China's reliance on imported cotton yarn from 18% in 2024 to over 22%, a structural shift that domestic spinners cannot ignore.
Practical Advice
**For Buyers:**
- Monitor arrival schedules from August to October; concentrated arrivals may trigger temporary price dips.
- Lock in quarterly contracts with Vietnamese and Indian suppliers for C32S and C40S to leverage current price gaps.
- Set up a price monitoring mechanism to switch sources when the import-domestic gap narrows below 200 yuan per ton.
**For Exporters:**
- Include price adjustment clauses in export quotes to hedge against domestic yarn price declines from import surges.
- Use forward forex contracts or yuan settlement for import purchases to reduce currency exposure.
- Develop blended fabric products for Southeast Asian and Middle Eastern markets, leveraging low-cost imported yarn to avoid direct price competition with domestic mills.