On July 28, the domestic futures market closed with more contracts falling than rising. The staple fiber 2609 contract dropped 1.20% to 7,250 points, cotton yarn 2609 fell 1.00% to 22,265 points, and cotton 2609 declined 0.69% to 15,830 points. Meanwhile, upstream PTA 2609 fell 1.37% to 5,628 points, and bottle-grade chip 2609 dropped 0.97% to 7,122 points. This broad decline is not an isolated event but a signal of overall pressure on the polyester chain, indicating that the textile raw material market is undergoing a price correction driven by weak demand.
Background
From the market performance, the declines in staple fiber and cotton yarn outpaced that of cotton, reflecting their different fundamentals. Staple fiber, as an intermediate product in the polyester chain, is dragged down by both falling PTA costs and low operating rates in downstream weaving. Industry data shows that the comprehensive loom operating rate in the Jiangsu-Zhejiang region has remained around 60%, lower than the same period last year, leading to procurement of staple fiber based only on immediate needs with minimal speculative stocking.
The decline in cotton yarn futures more directly reflects destocking pressure in the grey fabric market. Data from China Customs and the National Bureau of Statistics indicates that since the second quarter, the growth rate of new orders in the cotton textile industry has slowed year-on-year, with some small and medium-sized spinning mills actively reducing operating rates to control finished product inventories. Although cotton futures fell more moderately, the closing price of 15,830 yuan is approaching the low range of the past three months, and expectations of state reserve cotton releases are also capping upside potential.
Industry Impact
The cascading effect of this round of futures price declines on various links of the chain deserves attention. For upstream PTA and staple fiber producers, lower futures prices imply a possible decline in spot transaction prices, further compressing profit margins. With polyester plants holding medium-to-high inventories, price promotions may become the main means of destocking in the short term.
For cotton processing and trading enterprises, weakening cotton prices combined with the approaching new cotton harvest season significantly increase the risk of hoarding. Weather conditions in the Xinjiang cotton region have been generally stable, and without major natural disasters, production this year is expected to remain high, further exacerbating the supply-side loose situation.
Downstream weaving and garment OEMs, however, have gained a brief procurement window. Lower raw material costs help improve their gross margins, but this depends on a simultaneous recovery in terminal garment orders. Foreign trade data shows that restocking demand from European and American markets has not yet shown a clear rebound, and competition from Southeast Asian textile countries is also diverting some orders, keeping downstream companies cautious about large-scale replenishment.