16,150 yuan per ton — that was the closing price of the main Zheng cotton contract (2609) on August 6, up 185 yuan from the previous day, with prices trending upward during the week. Yet at the same time, domestic pure cotton yarn mills kept their raw material inventories at 30.11 days, unchanged from the previous period. This clear divergence between futures market momentum and spot restocking behavior reflects a tug-of-war between cost support and weak demand at different links of the supply chain.
Background
Spot cotton prices rose on a weekly average basis, with the main Zheng cotton contract showing high trading volume and open interest, indicating a relatively strong market. However, the main cotton yarn futures contract (2611) closed at 22,625 yuan per ton, up only 145 yuan from the previous day, a much smaller gain than cotton. This suggests that yarn prices lack upward momentum, and cost pass-through is encountering resistance at the spinning stage.
Inventory data shows that as of August 6, domestic pure cotton yarn mills held raw material inventories of 30.11 days, flat from the previous period. Most mills adopted a just-in-time purchasing strategy, with limited enthusiasm for building stocks. A 30-day inventory level is neutral-to-high — not tight, nor a burden — but the willingness to actively increase stockpiles is clearly weak. Such a mindset is uncommon in the same period of previous years.
Industry Impact
The widening futures spread between cotton and cotton yarn directly compresses profit margins at the spinning stage. Based on current futures prices, theoretical processing profits for yarn have narrowed notably, and some small and medium-sized mills may even face losses. For buyers, this means limited room for price negotiation on cotton yarn, but whether actual transaction prices can follow the uptrend depends on downstream order support.
Behind the flat inventory figures lies a divergence in market expectations. On one hand, rising cotton costs provide a floor for yarn prices; on the other hand, terminal demand has not shown clear improvement, with weak purchasing enthusiasm in gray fabric and apparel segments, making mills reluctant to increase inventories. This pattern of "costs pushing up, demand pulling down" is unlikely to break in the short term.
From an industrial cluster perspective, major cotton yarn producing regions such as Shandong and Henan maintain stable operating rates, but new orders are mostly small and short-term, with long orders notably reduced. Some mills are adjusting product mixes by increasing blended or differentiated yarns to mitigate the low-profit dilemma of pure cotton yarn. Such structural adjustments may reshape the supply pattern of the cotton yarn market in the medium to long term.
For foreign trade enterprises, the volatile uptrend in cotton prices increases the risk of export price fluctuations. If the RMB exchange rate moves simultaneously, exchange losses could further erode profits. Currently, the price gap between international and domestic cotton is within a reasonable range, but if domestic prices continue to strengthen, imported cotton yarn may regain its cost advantage, posing additional competitive pressure on domestic mills.