Cotton Yarn Market Shows Signs of Recovery: Mills Hold Prices Amid Downstream Low Inventory Strategy

The cotton yarn market, after a prolonged slump since June, showed marginal improvement in late July. However, this recovery is not across the board but exhibits significant structural characteristics: low-count yarns are strengthening while high-count yarns face pressure, and mills' price-holding stance coexists with downstream low inventory strategies, shifting market sentiment from pessimism to cautious optimism.

Low-Count Yarns Lead, High-Count Under Pressure

Feedback from cotton mills in Shandong, Jiangsu, and Hubei indicates that the improvement in late July is mainly concentrated in OE10S-OE32S and low-count ring-spun C21S-C40S series. Coastal fabric mills and intermediaries have notably accelerated inquiries and pickups for these varieties, prompting some mills to raise OE yarn quotes by 100-300 yuan per ton, with larger brands seeing steeper increases. Meanwhile, transactions for C40S across low, medium, and high grades have also shown modest improvement.

However, the premium end tells a different story. Quotes for C60S and above high-count carded and combed yarns have stabilized with a slight downward trend, with mills adopting flexible 'order-based, one-price-per-order' strategies. This divergence reflects structural differences in end demand: home textiles and regular apparel orders are relatively stable, while demand for high-end shirts and suits remains weak.

Foundation for Mills' Price-Holding: Cost Support and Policy Expectations

Mills' current price-holding stance is not based on blind optimism. Three factors support it: first, a sustained rise in overseas cotton yarn quotes. Over the past two weeks, quotes from Vietnam, India, Pakistan, Indonesia, and Uzbekistan have been increasing, weakening the price suppression effect of imported yarn on domestic products. Second, the ongoing 2026 central reserve cotton sales and reduced supply tightness concerns before the 2026/27 new crop arrival have stabilized cotton cost expectations. Third, the China-US framework for reciprocal tariff reductions of $30 billion each provides medium-to-long-term confidence for export-oriented mills.

A large-scale mill in Dezhou, Shandong, noted that although the industry is still in a traditional off-season and some small and medium mills' inventory rates continue to rise slightly, the company looks forward to market recovery after August. This 'off-season but not inactive' price-holding behavior essentially pre-prices future demand recovery.

Downstream 'Light Inventory' Strategy: Wait-and-See or Preparing?

In stark contrast to mills' price-holding, downstream fabric mills and yarn traders continue to strictly implement a low-inventory strategy. Feedback from Jiangsu, Zhejiang, and Guangdong markets shows that end-users have been purchasing on a need-to-basis over the past week, without significant restocking despite the price stabilization. This caution stems from two considerations: first, terminal orders have not shown sustained volume, and hoarding could tie up capital prematurely; second, views on cotton's future trajectory remain divided, with some expecting reserve sales to cap cotton price upside.

Yet, from another perspective, downstream low inventories themselves create elasticity for future restocking. Once traditional peak-season orders kick in during August-September, concentrated restocking could quickly push yarn prices higher. Current mill price-holding, to some extent, aims to push downstream to act earlier.

Practical Recommendations

For Buyers - For essential OE and low-count ring-spun yarn orders, lock prices by late July to early August to avoid passive acceptance of price hikes when the peak season starts. - High-count yarn purchases can be moderately delayed; current quotes may still have room to fall. Monitor order changes after mid-August before deciding. - Closely watch overseas cotton yarn price trends. If import yarn price increases continue to widen, domestic yarn's cost-effectiveness will become more prominent.

For Mills - Consider increasing operating rates for low-count yarn lines to seize the current window for destocking and profit locking. - Stick to 'production on order' for high-count yarn business to avoid inventory buildup from speculative stocking. - Enhance communication with key accounts and traders, using the price-holding window to push forward long-term contract negotiations, converting short-term confidence into medium-to-long-term orders.