While the market habitually attributes all weakness to the 'off-season', a set of contrasting data reveals deeper structural shifts: dye prices surged over 65% by late July, while Zhengzhou cotton futures entered a weak correction channel. On the same industrial chain, upstream raw materials and downstream dyeing chemicals are moving in opposite directions, squeezing margins in the middle segment. This divergence is not a short-term fluctuation but a result of shifting supply-demand dynamics and cost transmission mechanisms.
Structural Divergence: High-Count Yarn Resilience vs. Commodity Yarn Involution
Feedback from mills across regions shows the off-season chill has reached production decisions. Since late July, many inland cotton yarn mills have offered discounts to clear inventory, with medium-low count ring-spun and rotor-spun yarns bearing the brunt of price cuts. In stark contrast, 60S and above high-count combed and carded yarns have maintained stable ex-factory prices, demonstrating notable resilience. This divergence is no accident: high-count yarns serve high-end fabric demand with stronger customer loyalty and stable orders, while medium-low count yarns suffer from severe homogeneity and are prone to price wars during weak demand. For buyers, locking in high-count yarn prices during the off-season may offer better value than commodity yarns, while mills must upgrade product mix to escape the price red ocean.
Operating Rates vs. Inventory: The Hidden Concern of 90% Capacity
Despite weak demand, some large mills in Xinjiang maintain operating rates at 90%, keeping production running. This seemingly contradictory scenario reflects a delicate balance between maintaining utilization and controlling inventory. High operating rates dilute fixed costs but also swell finished goods inventory, especially as coastal fabric mills and traders temper purchasing intentions, raising receivables risk. Industry data shows downstream fabric mills, yarn dealers, and garment factories generally adopt low-inventory, thin-margin strategies, purchasing on demand and avoiding stockpiling, intensifying market competition. Small and medium-sized mills, with fragile capital chains and narrow customer bases, see profit margins squeezed to the limit. This 'trust deficit' between upstream and downstream is prolonging the off-season pain.
Dyeing Cost Pass-Through Blocked: The Chain Reaction of Fee Hikes
The downstream printing and dyeing sector also faces cost challenges. Since early 2026, dye prices have climbed steadily, compounded by rising auxiliaries and labor costs, sharply increasing processing expenses. Under pressure, many dyeing factories in Jiangsu and Zhejiang have raised processing fees, with large plants in Shaoxing increasing charges by 0.5 yuan per kilogram for knitted fabrics and 0.2 yuan per meter for woven fabrics. Though seemingly modest, these increases are difficult for fabric and garment enterprises to absorb amid weak consumption and industry-wide price competition, blocking cost transmission downstream. Consequently, dyeing mills cannot fully release cost pressures and must either compress their own margins or press upstream suppliers, but cotton prices are already under pressure due to weak demand, leaving limited room for further cuts.
Awaiting 'Golden September and Silver October': The Key to Breaking the Deadlock
The cotton textile industry is currently in the trough of the demand off-season: upstream cotton futures are under pressure, midstream yarn is caught in involution, and downstream dyeing costs are rising. The whole industry can only wait for the traditional peak season to release orders. However, historical experience suggests that whether peak-season demand materializes depends on genuine consumption recovery, not merely seasonal restocking. If orders fall short, current high operating rates and inventory pressure could trigger sharper price adjustments. Therefore, all links in the chain should proactively manage risks rather than passively wait.