July's cotton textile market has not seen the expected recovery, but has sunk deeper into the off-season mire. Zheng cotton futures began a weak correction in late July, while competition in cotton yarn prices has become fierce, and the downstream dyeing sector is weighed down by cost pressures. A notable detail: while most yarn varieties are being discounted to clear inventory, prices for 60S and higher combed and carded yarns remain stable. This divergence may be key to understanding the current market.
Background
The traditional off-season, coupled with weak demand, has created a clear temperature difference across the cotton textile chain. Inland yarn mills, to clear inventory, have generally offered discounts since late July, but sales of medium- and low-count ring-spun and rotor-spun yarns remain sluggish. In contrast, high-count yarn prices are firm, with ex-factory prices basically unchanged, showing that high-end products have better resilience than mid- and low-end ones.
Large cotton textile enterprises in Xinjiang are also struggling. Although local factory operating rates remain high at 90%, production has not stopped, but fluctuating cotton raw material prices, low-price competition from inland mills, and cooling purchasing intentions from coastal fabric mills and intermediaries have slowed product sales and increased the risk and pressure of payment collection.
Downstream fabric mills, yarn dealers, fabric and garment processing plants generally adopt a low-inventory, thin-margin strategy, purchasing on demand and avoiding stockpiling. The game between upstream and downstream has directly made the cotton yarn market fiercely competitive, squeezing the profit space of small and medium-sized cotton textile enterprises and greatly increasing operational difficulty.
Industry Impact
The cost pressure on the dyeing sector has been particularly prominent in 2026. Since the beginning of spring, dye prices have continued to rise, with an overall increase exceeding 65% by late July. Dyeing auxiliaries and labor costs have also risen, sharply increasing processing costs. Under cost pressure, many dyeing factories in Jiangsu and Zhejiang have raised processing fees. In Shaoxing, large dyeing factories have increased fees by 0.5 yuan per kilogram for knitted fabrics and 0.2 yuan per meter for woven fabrics.
The fee increase seems modest, but the transmission chain is not smooth. Weak terminal consumption and low-price competition make it difficult for weaving and garment enterprises to quickly absorb upstream costs, and cost pass-through to downstream faces significant resistance. This means that the price increase by dyeing factories is more of a passive response than an active move. If downstream demand remains weak, dyeing factories may face a dilemma: raising prices leads to fewer orders, while not raising prices means losses.
From a global perspective, the current cotton textile industry is in a pattern of 'upstream falling, midstream competing, downstream waiting.' The pressure on Zheng cotton futures reflects pessimistic market expectations for demand; the price war in cotton yarn is a direct result of overcapacity and insufficient orders; and rising dyeing costs further squeeze already thin profits. This situation is unlikely to change in the short term, and the industry can only wait for the release of orders during the traditional golden September and silver October peak season.
But the firmness of high-count yarn is not accidental. Behind it lies the trend of consumption upgrading and differentiated competition—high-end fabrics and brand garments have continuously improving requirements for yarn quality, and the capacity for high-count yarn is relatively limited, with a better competitive landscape than mid- and low-count yarn. For cotton textile enterprises, this may be a signal: rather than competing on price in the red ocean, it is better to deepen and refine in niche segments.