When dye prices have surged over 65% within the year while terminal orders have yet to materialize, the profit margins across the cotton textile supply chain are being squeezed from both ends. Since late July, cotton mills in Jiangsu, Zhejiang, Shandong, and Hubei have reported that the weakening Zhengzhou cotton futures, combined with the off-season, have led to slight price concessions for some yarn shipments, yet prices for 60S and above combed and compact yarns remain stable. This contrast reveals a structurally divided market—premium products hold up, while mid-to-low-end segments are mired in chaos.
Cost Side: Soaring Dye Prices and Ripple Effects of Processing Fee Hikes
Dye prices have climbed persistently since 2026, with cumulative gains exceeding 65% by late July. Coupled with rising auxiliary materials and labor costs, dyeing mills face mounting pressure. Factories in Jiangsu, Zhejiang, and Shandong have raised processing fees—for instance, a major mill in Shaoxing increased knit dyeing fees by RMB 0.5/kg and woven by RMB 0.2/m. Individually, these increases seem modest, but against a backdrop of weak demand, they are difficult to pass through, potentially becoming the last straw for small and medium enterprises' cash flow.
The transmission of dyeing fee hikes is not instantaneous. Weaving and garment factories currently adhere to a 'light inventory, light profit' strategy, adopting a wait-and-see attitude toward upstream price increases, which takes time to digest. This implies that while dyeing mills have raised prices, actual transactions may be discounted or order volumes may decline, leaving dyeing mills themselves caught in a volume-price dilemma. For buyers, higher dyeing fees mean slightly higher fabric procurement costs, but more importantly, they must guard against suppliers compromising on quality to offset costs, thus tightening inspection standards.
Supply Side: Intensified Competition and Regional Divergence
The off-season trend in the domestic cotton textile market has become increasingly evident since July. Some large-scale mills, after completing previous orders, have joined the 'volume-price' competition to maintain operating rates, intensifying competition in the cotton yarn market. Small and medium enterprises face significantly greater difficulty in making profits, while large enterprises can sustain themselves through economies of scale. In Xinjiang's Kashgar, Aksu, and Shihezi, large mills maintain operating rates around 90%, but profits for rotor-spun and low-to-mid count ring-spun yarns are under pressure due to raw material fluctuations, price cuts by inland mills, and sluggish offtake by coastal weaving mills and traders, leading to higher finished goods inventory and receivables pressure.
What does this regional divergence mean? Xinjiang's large mills, despite high operating rates, focus on mid-to-low count products, directly competing with inland mills, making price wars inevitable. Inland mills, at a cost disadvantage, are forced to transition toward high-count and differentiated products, as evidenced by stable prices for 60S and above. For buyers, this is an opportune time to negotiate—mid-to-low count yarns have room for price cuts, but beware of quality substitution; high-count yarns offer stable quality, suitable for orders with strict requirements.
Demand Side: Off-Season Expectations and Risks for 'Golden September and Silver October'
Orders for the 'Golden September and Silver October' have not yet materialized, and downstream weaving mills, yarn dealers, fabric mills, and garment factories remain cautious, adhering to light inventory strategies. This collective destocking exacerbates the off-season gloom but also builds space for a rebound. Once orders are released collectively, short-term supply shortages could drive prices up rapidly. However, global economic uncertainty persists, foreign trade orders are recovering slowly, and domestic consumption remains weak, casting doubt on the strength of the peak season.
For foreign trade enterprises, exchange rate fluctuations and shipping costs are additional variables, and dyeing fee hikes will further compress profits. It is advisable to incorporate cost float clauses in quotations or sign short-term price lock agreements with dyeing mills. Meanwhile, consider leveraging the cost-effectiveness of Xinjiang's high-count yarns to adjust procurement structures.