Heat and Weak Orders Drag Weaving Utilization: The Underlying Logic of Cotton and Polyester Yarn Price Pressure

When the utilization rate drops below 40%, the supply-demand balance in the yarn market tilts faster than expected. As of August 6, the operating rate of large circular knitting machines in Shaoxing fell to 39.81%, down 2.77 percentage points from the previous week and 5.05 percentage points year-on-year. Behind this figure lies the dual squeeze of scorching heat and order scarcity, which also serves as a direct footnote to the price pressure on cotton and polyester yarn.

Event Background

The current decline in weaving utilization since late July is not driven by a single factor. High temperatures have forced some factories to shorten working hours or even suspend operations temporarily, while weak terminal orders have reduced the incentive to run at full capacity. Notably, large-scale factories still have pending orders from earlier periods, maintaining utilization at 50-70%; however, small and medium-sized circular knitting mills show significantly lower loads, with some choosing to halt operations and wait. This divergence reflects widening disagreements across the textile supply chain about future prospects.

In terms of order structure, only a portion of autumn/winter apparel orders have entered negotiation, and large-volume orders face significant resistance due to volatile geopolitical conditions. This means that even if sporadic demand emerges, it is insufficient to offset the overall contraction in order volumes. For weaving mills that rely on economies of scale, the decline in utilization is not merely a short-term phenomenon; it may evolve into a long-term suppression of upstream yarn procurement strategies.

Industry Impact

The impact of declining weaving utilization is transmitting upstream along the supply chain. For cotton yarn, demand support is clearly inadequate. Low loads or temporary shutdowns at small and medium-sized circular knitting mills directly reduce cotton yarn purchases, while sluggish autumn/winter order negotiations delay or shrink seasonal stocking demand. As a result, spot market negotiation centers are under pressure, and futures prices trend bearish amid weak demand expectations. The bearish score of -1 reflects the market's cautious stance on short-term cotton yarn prospects.

Polyester yarn faces a similar yet distinct situation. As a chemical fiber yarn, its price is more driven by feedstock costs such as crude oil and PTA; however, demand-side bearish factors currently dominate. With weaving mill utilization declining and terminal orders overall weak, polyester yarn procurement demand is weakening in tandem, leaving spot negotiation centers without support. This implies that even if feedstock costs provide some support, weak demand will limit any rebound in prices.

For buyers, the decline in utilization is not entirely bad news. Lower yarn prices mean a temporary reduction in procurement costs, but one must be wary of quality risks and delivery stability behind low prices. For foreign trade enterprises, geopolitical uncertainty makes large orders increasingly rare; small and short orders may become the norm in the coming period, requiring a more flexible and responsive supply chain.

Practical Recommendations

For Buyers - Use the current price window to sign short-term fixed-price contracts with reputable yarn mills to avoid future price volatility. - Prioritize large-scale factories with stable utilization above 50% to ensure controllable delivery times and quality. - Monitor weekly operating rate data from weaving clusters like Shaoxing as a leading indicator for procurement timing.

For Foreign Trade Enterprises - Adjust order-taking strategies to adapt to small-batch, high-frequency orders, reducing inventory risks from cancellations or delays of large orders. - Strengthen information sharing with upstream yarn suppliers and establish rapid replenishment mechanisms to cope with order fragmentation. - Closely track geopolitical developments and incorporate price adjustment clauses or currency hedging mechanisms into contracts to hedge against uncertainty.