Cotton prices finally showed a clear downward movement after a period of high-level consolidation. According to the National Bureau of Statistics' monitoring of 50 major means of production in national circulation, in mid-July 2026, the market price of lint cotton (grade white cotton three) was 16,777.3 yuan per ton, down 203.3 yuan per ton, or 1.2%, from early July. This marks the largest single-decade decline in nearly three months for this category and the first time it has fallen below the 17,000-yuan threshold.
For the textile industry, cotton price movements are never just about raw material costs. They directly impact yarn quotations, grey fabric pricing, and even determine the procurement pace of downstream apparel companies. What does this decline mean? Is it a temporary correction or the beginning of a new downward channel?
Supply and Demand Logic: Short-term Pressure and Long-term Variables
On the supply side, domestic cotton production this year is expected to remain high, while import cotton quotas were released en masse mid-year, causing port inventories to accumulate steadily. Data from the National Cotton Market Monitoring System shows that as of mid-July, commercial cotton inventories nationwide were up about 8% year-on-year. Ample supply is the fundamental factor weighing on prices.
Demand is showing a divergent pattern. The domestic market is supported by summer fabric replenishment orders, maintaining moderate growth. However, foreign trade orders have been constrained by high inflation and destocking cycles in overseas markets, with the overall recovery falling short of expectations. In particular, import demand for cotton apparel from major European and American markets has yet to show a clear rebound.
This round of price decline is essentially a lagged response to the loose supply-demand situation. Notably, the decline of only 1.2% occurs during the critical transition from the traditional textile off-season to the 'golden September and silver October' period, making its signaling significance greater than the absolute magnitude.
Industry Chain Transmission: Spinning Mills' Procurement Logic Is Shifting
The first to feel the impact of falling cotton prices are spinning mills. Over the past two months, due to high and volatile cotton prices, most mills adopted a 'buy-as-needed' strategy, keeping raw material inventories at a low 15-20 days. Now that prices have fallen, some companies have begun to test the waters for replenishment, but most are reluctant to chase the decline, with a strong wait-and-see sentiment.
This wait-and-see attitude itself can exacerbate short-term downward price pressure. Once a negative feedback loop of 'price drop → wait for purchases → inventory decline → further price drop' forms, it could trigger a rapid destocking cycle. For grey fabric and dyeing and finishing companies, while lower raw material costs are beneficial, if downstream apparel customers simultaneously demand price cuts, profit margins may not expand substantially.
From the end-market perspective, brand apparel companies are currently more focused on inventory turnover than raw material costs. A sustained decline in cotton prices would help improve the cost structure of next spring/summer products, but the short-term boost to order volumes is limited.
Regional Industrial Clusters: Divergent Reactions
Different industrial clusters have reacted differently to this price drop. In Xinjiang's main cotton-producing areas, ginneries have been slow in sales, with some forced to sell at discounts due to cash flow pressures, widening spot discounts. In the Yangtze River Delta spinning clusters, such as Nantong, Jiangsu, and Lanxi, Zhejiang, mill operating rates remain at around 70%, with raw material procurement focused on essential needs and no panic selling observed.
In traditional cotton textile bases like Shandong and Henan, small and medium-sized mills are more price-sensitive. Some have already begun to slightly lower quotations for 32s and 40s combed cotton yarn, attempting to lock in orders ahead of expected price drops. This localized price-cutting behavior may spread to a wider area over the next two weeks.
Outlook: August Is Key
August is the start of the stocking season for the textile industry's 'golden September and silver October'. If cotton prices continue to fall below 16,500 yuan per ton in early August, it could trigger concentrated replenishment by more mills, forming a temporary bottom. Conversely, if prices stabilize around 16,700 yuan, it would indicate that the market has digested the bearish news, and prices will enter a narrow range fluctuation.
On the macro front, the pace of Fed rate hikes and RMB exchange rate fluctuations remain two key external variables affecting imported cotton costs and export orders. Domestically, whether autumn/winter fabric orders materialize as expected will be key to determining whether demand can support cotton prices.