In July 2026, the cotton textile chain is caught in a rare 'off-season price hike' dilemma: dye prices have surged 65% since the start of the year, dyeing mills in Jiangsu and Zhejiang have collectively raised processing fees, yet terminal orders have not landed and yarn prices have already loosened. The dual squeeze of rising costs and weak demand is triggering a brutal redistribution of profits across the chain.
The Transmission Chain of Dye Fee Hikes
Dye prices have accumulated a rise of over 65% since early 2026, coupled with rising auxiliary and labor costs, putting immense pressure on dyeing mills in Jiangsu, Zhejiang, and Shandong. By late July, a large dyeing mill in Shaoxing announced an increase of 0.5 yuan/kg for knitted fabrics and 0.2 yuan/meter for woven fabrics. For weaving mills and garment factories, the single increase seems limited, but against the backdrop of weak terminal demand and intensifying industry competition, this extra cost takes longer to digest, and some small weaving mills even face the dilemma of 'losing money on every order.'
The root cause of the dye fee hike lies in tight supply of upstream dyes, while dyeing mills in the midstream have limited pricing power and can only pass costs downstream. However, the 'light inventory, light profit' strategy of downstream weaving and garment enterprises makes cost transmission difficult, and the fee hike may further squeeze already thin processing margins.
'Volume-Price' Involution in the Yarn Market
In contrast to the dye fee hike, cotton yarn prices have shown partial loosening since late July. Zheng cotton futures have been in a continuous weak correction, coupled with the off-season, and 'Golden September and Silver October' orders have not yet materialized. Some inland yarn mills have begun offering small discounts to maintain shipments, but ex-factory prices for 60S and above high-count carded and combed yarns have basically stabilized. This structural divergence reflects relatively rigid demand for high-count yarns, while mid- and low-count yarns face more intense price competition.
After completing previous orders, large-scale cotton mills have successively joined the 'volume-price' involution to maintain operating rates. Downstream weaving mills, cotton yarn dealers, fabric mills, and garment factories adhere to a light inventory strategy, leading to intensified competition in the cotton yarn market and significantly increasing the difficulty of profitability for small and medium-sized enterprises. Although large mills in Kashgar, Aksu, and Shihezi in Xinjiang maintain an operating rate of about 90%, profits for rotor-spun yarn and mid- and low-count ring-spun yarn are under pressure due to raw material fluctuations, price cuts by inland yarn mills, and slower pickups by coastal weaving mills and intermediaries, with rising pressure on product sales and payment collection.
Regional Responses and Capacity Utilization Gamble
The capacity game between Xinjiang and inland regions has become the focus of this adjustment. Xinjiang large mills maintain high operating rates thanks to raw material cost advantages and policy support, but sales pressure has transmitted from the coast to the origin, and payment collection cycles have lengthened. Inland yarn mills compete for limited orders through price cuts, further intensifying price competition. This regional shift essentially reflects the difficult trade-off between 'maintaining operating rates' and 'protecting profits' in the industry chain.
For buyers, the current off-season window is the period with the strongest bargaining power. Although dye fee hikes have landed, partial loosening of yarn prices provides a hedging space. It is recommended that buyers sign quarterly long-term agreements with dyeing mills to lock in processing costs; meanwhile, prioritize high-count yarns to avoid price war risks in low-count yarns. For foreign trade enterprises, exchange rate fluctuations and overseas demand uncertainties remain; they should optimize order mix, increase the share of high value-added varieties, and consider joint negotiation with dyeing mills to share cost pressure.