In June 2026, China's cotton textile industry sentiment index dropped to 48.3%, down 1.6 percentage points from May, remaining below the 50 threshold for the second consecutive month. All seven sub-indices—covering raw material procurement, production, sales, inventory, operations, and confidence—fell into contraction territory, signaling the off-season pressure has fully transmitted from downstream to upstream. Mills are rapidly accumulating inventory, and the pain is intensifying.
Raw Material Price Divergence: Polyester Staple Fiber Leads Decline
The raw material procurement index stood at 48.3% in June, down 1.9 percentage points month-on-month, reflecting weak restocking appetite. Domestic 3128-grade cotton averaged 17,113 yuan/ton, down 260 yuan/ton or 1.5%. The Zhengzhou cotton futures contract fluctuated between 15,590 and 16,440 yuan/ton, with a late-month rebound failing to reverse the bearish trend. Polyester staple fiber (PSF) saw a steeper decline: the monthly average price of 1.4D direct-spun PSF was 7,611 yuan/ton, plummeting 416 yuan/ton or 5.18%. The trigger was the US-Iran peace memorandum that partially restored navigation in the Strait of Hormuz, sending crude oil prices back to pre-conflict levels and removing cost support. Viscose staple fiber (VSF) bucked the trend, with mainstream grades averaging 14,092 yuan/ton, up 57 yuan/ton or 0.41%, thanks to strong pre-sales from fiber producers.
This price divergence forces mills to adopt more granular procurement strategies. While lower cotton and PSF costs reduce input expenses, weak downstream orders discourage bulk buying. The raw material inventory index fell to 47.9%, with cotton inventory at 48.0% and non-cotton fiber inventory at 47.9%—both below the threshold, indicating the industry is in a destocking phase.
Production and Sales Shrink Simultaneously, Inventory Builds Faster
The production index dropped to 48.9% in June, down 1.4 percentage points. Yarn output index plunged to 47.6% (down 3.1 points), and fabric output index fell to 49.1% (down 2.3 points). The equipment operating rate index held at 49.5%, flat from May, suggesting mills are reducing shift loads rather than shutting down. Sales were equally weak, with the product sales index at 48.9% (down 3.3 points). The average price of 32-count combed cotton yarn fell to 23,407 yuan/ton, down 332 yuan/ton, while pure cotton grey fabric (C 32x32 130x70) averaged 7.38 yuan/meter, down 0.05 yuan/meter.
More concerning is the inventory build-up. The product inventory index at 47.7% (below 50 indicates rising inventory) saw yarn inventory index at 47.7% and fabric inventory index at 47.8%. From mid-June onward, mills began accumulating finished goods rapidly, squeezing cash flow and margins.
Business Operations and Confidence Deteriorate Sharply
The business operation index fell to 49.4% (down 0.6 points), with revenue index at 48.6% (below threshold) and profit index at 50.2% (still above but declining). The marginal profit gain was largely passive, stemming from lower raw material costs rather than order-driven growth. The most alarming metric was the business confidence index, which plummeted to 45.0%—down 4.4 points from May and the lowest level this year. Mills expect further weakening in the coming months, reflecting deep pessimism about order pipelines.
Global Manufacturing Slowdown Adds Pressure
The June JPMorgan Global Manufacturing PMI came in at 52.2%, down 0.4 points, marking 11 consecutive months above 50 but with slowing momentum. China's official manufacturing PMI rose to 50.3% (up 0.3 points), returning to expansion. The contrast suggests that the cotton textile sector's woes are structural: sluggish apparel demand, order shifts to other regions, and inventory cycle adjustments. The global slowdown is now filtering into domestic mills, compounding the seasonal weakness.