July and August are traditionally slow for textiles, but this year's chill runs deeper. Zhengzhou cotton futures have weakened since late July, cotton yarn prices are caught in a race to the bottom, and dyeing mills have been forced to raise fees amid a 65% surge in dye costs since spring. Upstream prices fall, downstream costs rise, and spinners in the middle are squeezed from both ends.
Background
Feedback from spinning mills across the country points to a widespread order shortage. Orders for the traditional peak season—'Golden September, Silver October'—have yet to materialize, leaving the market without firm demand. To clear inventories and accelerate shipments, many inland cotton yarn mills have offered discounts since late July, with low-count ring-spun and open-end yarns bearing the brunt of price cuts.
Notably, high-count yarns have shown resilience. Prices for 60S and above combed and carded yarns remain stable, widening the gap between high- and low-count products. This underscores how product mix directly determines pricing power and profitability during demand slumps.
Industry Impact
The price war in cotton yarn stems from upstream-downstream tug-of-war. Weaving mills, yarn distributors, fabric and garment processors are all pursuing low inventory and thin margins, buying only as needed and avoiding stockpiles. This mentality has slowed yarn circulation and squeezed profits for small and mid-sized mills, sharply raising operational difficulty.
Large Xinjiang mills maintain high operating rates around 90%, but finished goods sales have slowed and payment recovery risks are rising. The dual blow of low-priced inland yarn and cooling demand from coastal weavers has left even scaled players vulnerable. High operating rates reflect the fear of stopping—losing workers and customers is costlier than running at a loss.
The dyeing sector faces its own cost crunch. Dye prices have climbed steadily since early 2026, up over 65% by late July. Auxiliaries and labor costs have also risen, forcing many dyeing mills in Jiangsu and Zhejiang to raise processing fees. In Shaoxing, large plants have hiked fees by 0.5 yuan per kilogram for knitted fabrics and 0.2 yuan per meter for woven fabrics.
The fee hikes seem modest, but pass-through is blocked. Weak end-user demand and industry-wide price competition prevent weaving and garment firms from absorbing higher costs, so dyeing mills end up compressing their own margins. The chain is stuck in an awkward loop: upstream rises, downstream resists, middle bears the load.
Practical Advice
For Buyers - Leverage the off-season window to negotiate long-term yarn contracts, especially for stable supply of high-count yarns. - Adopt phased purchasing and low inventory to avoid peak-season cost spikes. - Monitor dye price trends and negotiate dyeing fee adjustment mechanisms in advance to lock in processing costs.
For Exporters - Include dye fee fluctuation clauses in quotes to protect margins. - Develop high-count and differentiated products to escape the low-count red ocean. - Strengthen exchange rate risk management to counter price volatility from Zhengzhou cotton futures.
The off-season will pass, but structural contradictions won't resolve on their own. Companies that survive this summer will be those that proactively adjust product mix and cost control rather than merely wait.