The cotton textile chain is undergoing a typical off-season stress test. Cotton futures have weakened, cotton yarn markets are caught in price competition, and dyeing costs have surged. These three pressures are compounded by high operating rates, reflecting the rigidity of capacity against price flexibility. As 'golden nine, silver ten' orders have yet to materialize, the game across the chain has shifted from demand to cost and inventory rebalancing.
Background
Since July, the off-season characteristics of the domestic cotton textile market have become more pronounced. Most large and medium-sized cotton spinning enterprises are finishing their previous orders. To maintain operating rates, mills are forced into price-cutting and volume runs. According to industry public data, operating rates in Xinjiang factories remain at a high of 90%, with production continuing. However, rotor-spun yarn and medium-low count ring-spun yarn are struggling. Cotton raw material price fluctuations, low-price impacts from inland mills, and cooling demand from coastal fabric manufacturers and traders have combined to slow sales for large Xinjiang mills, raising the risk of delayed payments.
Notably, in the overall weak market, 60S and above high-count combed and carded yarn prices remain firm, with ex-factory prices basically stable. High-end cotton yarn shows better resilience than mid-to-low-end products. This is not accidental. High-count yarn corresponds to high-end fabric and apparel orders, with relatively rigid demand and higher capacity concentration, giving mills stronger pricing power. This divergence implies that the involution model relying solely on scale and low prices is no longer sustainable; product structure upgrading becomes key to resisting cyclical downturns.
Industry Impact
The downstream printing and dyeing sector is facing a cost hurdle. Since the beginning of 2026, dye prices have continued to rise, with an overall increase exceeding 65% by late July. In addition, dyeing auxiliaries and labor costs have also risen, sharply increasing processing costs for dyeing enterprises. Under cost pressure, several dyeing factories in Jiangsu and Zhejiang have raised processing fees. In Shaoxing, large dyeing plants increased fees by 0.5 yuan per kilogram for knitted fabrics and 0.2 yuan per meter for woven fabrics.
The fee hikes seem modest, but the transmission mechanism is not smooth. With weak terminal consumption and industry-wide low-price competition, fabric and garment enterprises cannot quickly absorb upstream cost pressures. The blocked cost transmission means that the price increase by dyeing enterprises is more of a 'passive response' than an 'active pricing' move. For buyers, the fee hike will directly compress fabric profits, requiring early order and price locking. For foreign trade companies, if costs cannot be passed on to overseas clients, export profits will further narrow.
The game between upstream and downstream has made cotton yarn market competition white-hot. Small and medium-sized spinning enterprises see their profit margins continuously compressed, and operational difficulty increases. Large enterprises, leveraging scale and capital advantages, can maintain operating rates, but finished goods inventory and payment recovery pressures are equally significant. This state of 'high operating rate, low profit' may trigger a wave of capacity clearing if it persists until the peak season.