July is traditionally a slow season for textiles, but this year the chill along the cotton supply chain is more biting. Dye prices have surged over 65% since spring, directly inflating processing costs. Consequently, dyeing factories in Jiangsu and Zhejiang have raised fees—large plants in Shaoxing increased charges by RMB 0.5 per kilogram for knitted fabrics and RMB 0.2 per meter for woven fabrics. While seemingly modest, these hikes come at a time of weak end-demand, severely hampering cost pass-through.
Yarn Market Divergence
Unlike the rigid rise in dye prices, cotton yarn prices show divergence. Since late July, many inland mills have offered discounts to clear inventory, with mid-to-low count ring-spun and rotor-spun yarns hit hardest. However, prices for 60S and higher combed and carded yarns remain stable, demonstrating superior resilience. This divergence stems from demand structure—high-count yarns cater to stable high-end fabric orders, while mid-to-low count yarns face commoditization and price competition.
For buyers, this is a window to lock in high-count yarn prices, but they should be wary of quality fluctuations in discounted mid-to-low count yarns.
Intensified Upstream-Downstream Game
Inventory strategies are intensifying the tug-of-war. Large and medium mills are finishing prior orders and resorting to price cuts to maintain operating rates, while downstream weavers, traders, and garment factories adopt low-inventory, thin-margin policies, buying only on demand. This 'hot above, cold below' pattern fuels cutthroat competition, squeezing small mills' profits.
Xinjiang mills exemplify the dilemma—operating rates remain high at 90%, but sales of rotor and mid-low count ring-spun yarns slow, inventories build, and payment recovery risks rise. Inland mills' low-price attacks and coastal buyers' reluctance compound the pressure, leaving these mills in an 'overcapacity, low turnover' bind.
Blocked Cost Pass-Through
Beyond dyes, auxiliary agents and labor costs are also rising, burdening dyeing enterprises. The fee hikes, though modest, cannot be easily absorbed by weaving and garment firms facing weak consumption and price wars. Consequently, dyeing mills either absorb costs or lose clients—a lose-lose situation.
Traders must factor dyeing fee changes into quotes, or risk losses on each order.
Rational Expectations for Peak Season
The industry awaits 'Golden September, Silver October' orders, but history suggests recovery depends on the slope of end-demand. Domestic sales weakened further after July, and export orders show no clear uptick. Seasonal demand alone is unlikely to reverse the downturn. Even if orders arrive, the competitive landscape for mid-to-low count yarns won't fundamentally change—overcapacity and homogeneity persist.