In June 2026, China's textile and apparel exports surged to $29.27 billion, up 7.2% year-on-year and 14.3% month-on-month, hitting a new monthly high for the year. This spike was driven by a temporary thaw in Sino-US trade, overseas inventory replenishment, and early autumn-winter orders. However, the export boom did not trickle down to the domestic cotton spinning chain. In the traditional off-season, pure cotton yarn output and its share both fell, while cotton prices oscillated in a narrow range of 17,400-17,600 yuan/ton, with the monthly average dropping 1.4% month-on-month.
The Gap Between Exports and Domestic Demand
June's export strength was mainly fueled by traditional markets in Europe and the US. Customs data shows cotton product exports reached $6.45 billion, up 9% month-on-month, with exports to the US and EU rising 10.4% and 19.2% respectively, far outpacing the 6.8% growth to Belt and Road countries. This suggests a concentrated conversion of orders previously shelved due to tariff uncertainty, combined with restocking by overseas brands, creating a short-term pulse. The sustainability of this growth hinges on the future trajectory of Sino-US tariffs and the resilience of overseas end-consumer demand.
Domestically, June saw national yarn output of 1.927 million tons, up a marginal 0.3% year-on-year, but the share of pure cotton yarn declined as blended yarn gained ground due to lower chemical fiber prices. The average price of 32-count pure cotton yarn was only 23,336 yuan/ton, up a mere 0.25% month-on-month. Downstream weaving mills faced weak orders and rising finished product inventories, squeezing the bargaining space for cotton yarn. This structural gap between hot exports and cold domestic demand means the price transmission channel upstream is blocked, putting mills' margins under pressure from both ends.
Multiple Supply-Side Disruptions
New variables are brewing on the cotton production side. Persistent high temperatures in Xinjiang led to boll shedding, with overall seedling condition worse than last year—only 26.4% of surveyed fields reported good growth, a sharp 17.7 percentage point drop. Pest and disease incidence also intensified year-on-year. This directly reinforces market expectations of tighter new-season cotton supply, providing a floor for cotton prices.
Globally, cotton-producing countries in the Northern Hemisphere also faced abnormal weather. The USDA's June report lowered 2025/26 global cotton production to 25.542 million tons, consumption to 26.127 million tons, and ending stocks to 16.487 million tons. The supply-demand gap lends resilience to international prices. However, India's temporary removal of cotton import tariffs and a stronger US dollar capped foreign cotton gains, widening the domestic-international price spread to 3,029 yuan/ton (after 1% tariff), up 759 yuan from the previous month.
Policy vs. Market Dynamics
State reserve cotton sales emerged as the biggest short-term price suppressant. An announcement on July 14 indicated that central reserves would start selling on July 20, with daily volumes adjusted dynamically and only textile mills eligible to participate. This triggered wait-and-see sentiment among some firms, leading to a slight 2.7% month-on-month drop in June imports to 110,000 tons, though still triple the year-ago level. Cumulative imports for January-June reached 935,000 tons, double the prior year, with Brazil supplying 40.2%, Australia 27.9%, and the US 16.3%.
The China Cotton Association responded by raising its 2025/26 consumption forecast to 8.775 million tons (up 12.5% year-on-year) and imports to 1.5 million tons (up 42.5%), with ending stocks adjusted to 6.293 million tons. These figures imply that despite short-term demand weakness, the annual supply-demand balance remains tight. Combined with the potential for reserve sales to ease supply pressure, cotton prices are likely to remain range-bound, with no clear trend.