The cotton textile chain is undergoing a typical slack-season stress test: Zhengzhou cotton futures weaken, yarn orders are insufficient, and dyeing fee hikes face resistance in passing through. Notably, high-count yarn stands out as a resilient segment, with 60S and above combed yarn prices stable, while mid-to-low count yarns are trapped in price-cutting competition. This divergence reveals structural changes in end demand and suggests that the 'Golden September, Silver October' order rebound may be less optimistic than expected.
Signals Behind the Data
Since late July, many inland cotton yarn mills have offered discounts to clear inventory, but high-count yarn ex-factory prices remained flat. This is not accidental—high-count yarn corresponds to high-end fabric and apparel demand, supported by stable brand orders, while mid-to-low count yarns rely more on mass consumption and real estate chains, which are more sensitive to economic cycles. Industry data shows that most large and medium-sized cotton mills are finishing earlier orders and are forced into price competition to maintain operating rates, squeezing profits for smaller players.
Another key metric is operating rates: mills in Xinjiang maintain around 90%, but rotor-spun and mid-to-low count ring-spun yarns face difficulties. Fluctuating raw material prices, low-priced inland yarn, and weaker buying interest from coastal fabric mills and traders combine to slow finished product sales and raise receivable risks. High operating rates with declining orders mean rising inventory pressure; if peak-season demand disappoints, destocking could trigger more intense price wars.
Cost Pass-Through Obstacles and Dyeing Sector Woes
The downstream dyeing sector faces cost challenges. Since early 2026, dye prices have risen over 65% by late July. Auxiliaries and labor costs have also climbed, sharply increasing processing costs. Under pressure, many dyeing mills in Jiangsu and Zhejiang have raised processing fees, with large mills in Shaoxing increasing knit dyeing fees by 0.5 yuan per kg and woven fabric by 0.2 yuan per meter.
However, the seemingly modest fee hikes encounter resistance from weak end consumption and industry-wide price competition. Weaving and garment companies cannot quickly absorb upstream costs, so pass-through is blocked. This means dyeing mills' price increases mostly self-absorb costs rather than transfer them—in a buyer's market, any cost increase directly erodes margins. For buyers, while dyeing fee hikes are small, cumulative effects could squeeze thin-margin orders.
Slack-Season Game and 'Golden September, Silver October' Expectations
The cotton textile industry is at a seasonal low, with upstream-downstream gaming intensifying: yarn mills want to maintain operating rates, while fabric mills and traders adopt low-inventory, on-demand purchasing strategies, refusing to stockpile. This caution reflects uncertainty—if peak-season orders don't materialize, the entire chain faces a longer destocking cycle.
Historically, August is a key turning point, with order placement setting the tone for H2. But this year's uniqueness lies in significant upstream cost increases like dyes, coupled with weak domestic demand, meaning even if peak-season orders arrive, profit margins may be eroded by costs. Rather than waiting for price rebounds, the industry should optimize product mix, shifting toward high-value-added categories like high-count yarn to hedge systemic risks.