When the traditional off-season meets a weak correction in raw materials, the cotton textile chain is experiencing a rare 'full-link squeeze.' Since late July, Zheng cotton futures have weakened, while downstream orders remain sluggish, putting pressure on every link from cotton to dyeing. Notably, high-count yarn has bucked the trend, offering a possible path forward in a depressed market.
Off-Season and Rising Costs: A Multi-Pronged Squeeze
July is traditionally a slow month for textiles, but this year feels particularly tough. According to industry data, most large and medium cotton spinning mills are finishing up existing orders. To maintain operating rates, mills are being dragged into price-cutting competition. Since late July, many inland cotton yarn mills have offered discounts to clear inventory, but downstream weaving mills, dealers, and garment factories are sticking to low-inventory, thin-margin strategies, buying only as needed. This tug-of-war has intensified competition in the cotton yarn market, squeezing profitability for small and mid-sized enterprises.
Meanwhile, cotton prices have been volatile, inland mills are undercutting prices, and coastal weavers and intermediaries are hesitant to purchase. These factors have slowed sales for Xinjiang's large mills and raised credit risks. Reports indicate that local mill operating rates remain high at around 90%, but air-jet spun and medium-low count ring-spun yarns are struggling. The divergence between operating rates and profitability suggests that companies are sacrificing margins for market share—a clearly unsustainable approach.
High-Count Yarn: A Bright Spot Amid the Gloom
In the midst of widespread price cuts, 60S and higher combed and carded yarns have held firm, with ex-factory prices remaining stable. The resilience of high-end cotton yarn reflects a shift in demand toward quality and differentiation. For spinning mills, this is a clear signal: the era of scale-driven, low-price competition is ending, and product upgrading is key to weathering cyclical downturns.
The strength of high-count yarn has also supported demand for high-grade cotton, but the current weakness in cotton futures reflects broader pessimism about overall demand. The contrast between Zheng cotton's decline and high-count yarn's stability highlights a market divide: overcapacity in low-end segments and insufficient supply in high-end ones. This divergence may widen in the coming months, urging companies to avoid cutthroat competition in low-count yarn and focus on developing high-value-added products.
Dyeing Costs Surge, Fee Hikes Face Resistance
The downstream dyeing and finishing sector is also grappling with cost pressures. Since early 2026, dye prices have climbed steadily, with overall gains exceeding 65% by late July. In addition to dyes, auxiliaries and labor costs have risen, sharply increasing processing expenses. Under this cost burden, many dyeing factories in Jiangsu and Zhejiang have raised processing fees—for instance, large dye houses in Shaoxing have increased charges by RMB 0.5 per kilogram for knitted fabrics and RMB 0.2 per meter for woven fabrics.
While the increases seem modest, given weak end-consumer demand and intense price competition, weaving and garment companies struggle to absorb these costs, so the pass-through is blocked. Dyeing mills face a dilemma: raise prices and risk losing clients, or absorb costs and erode margins. For buyers, fee hikes are unavoidable in the short term, but they can mitigate the impact by optimizing order structures and consolidating purchases.
Practical Recommendations
For Buyers - Focus on differentiated products like high-count yarn to avoid price wars in low-count segments; prioritize suppliers with reliable high-count production capacity. - Plan purchases rationally, using the off-season price window to build moderate inventories while guarding against further price drops. - Negotiate dyeing fee adjustment mechanisms with mills, clarifying cycles and magnitudes to protect order margins.
For Exporters - Adjust product mix toward high-value-added items like high-count yarn and differentiated fabrics to escape low-end competition. - Monitor exchange rates and raw material fluctuations; include price adjustment clauses in contracts to mitigate cost risks. - Actively explore emerging markets to diversify reliance on single markets, and secure overseas orders before the 'Golden September, Silver October' peak.
In summary, the cotton textile industry is in a seasonal trough, with futures under pressure, yarn competition fierce, and dyeing costs rising. All eyes are on the upcoming peak season for relief. Yet even when it arrives, structural divergence will persist. Only by proactively upgrading product lines and optimizing supply chains can companies remain resilient amid cyclical swings.