Since mid-August, the international cotton market has experienced a rapid rally, with the ICE futures main contract breaking through the 82-cent and 85-cent levels successively. The strength in raw materials has directly transmitted to the yarn sector, with quotes from major exporting countries such as Vietnam, India, Pakistan, Indonesia, and Kazakhstan rising in tandem. The upward momentum has spread from pure cotton to polyester-cotton blends. However, a closer look reveals that this rally is not monolithic; there are clear differences in price increases and transaction activity across specifications and origins.
Structural Divergence in Price Hikes
From the quoting side, open-end, low-count siro, and compact-spun yarns have led the gains with the most pronounced increases. In contrast, combed and carded yarns of 50s and above from India and Vietnam have remained largely stable, with mills and exporters showing caution in adjusting prices for fear of losing customers. This divergence reflects different supply-demand dynamics: low-count yarns are volume-driven and highly sensitive to costs, so they must follow raw material movements; high-count yarns enjoy stronger customer loyalty but lack sufficient end-order support, making aggressive price hikes risky. Meanwhile, mainstream 16-45s polyester-cotton blended yarns from Vietnam and Indonesia have shown a steady-to-firm trend. Port inventories of blended yarns continue to decline, and with cotton and chemical fiber raw materials moving up simultaneously, cost pressures are transmitting downstream, underpinning blended yarn prices. This indicates that the current rally is not solely cotton-driven; chemical fiber price movements are also at play, so buyers need to monitor both cotton and polyester trends.
The India Factor: Policy Dividend Reshaping Competitiveness
India deserves special attention in this round. Since mid-August, domestic S-6 cotton spot prices and CCI auction floor prices have been raised sharply and repeatedly, fostering expectations of further increases among local mills and traders, which has warmed up stocking sentiment. However, transaction activity is clearly polarized: low-end yarns and cheap open-end yarns from second- and third-tier mills are struggling to sell, while medium-to-high-grade open-end and medium-count ring-spun yarns are transacting relatively actively, becoming key procurement targets for coastal fabric mills. A more profound change is coming from policy. From June 1 to October 31, 2026, India has implemented a temporary duty-free import policy for cotton, allowing leading mills and branded manufacturers to purchase large volumes of high-quality imported cotton from the US, Brazil, and Australia, significantly optimizing their cotton blending. This raw material upgrade has directly improved yarn quality metrics, including strength, CV values, and overall consistency, further enhancing the competitiveness of Indian cotton yarn in the import market. This also explains why Indian yarn quotes have shown resilience amid the price hike. For domestic fabric manufacturers, Indian yarn has shifted from a 'cheap substitute' to a 'cost-effective choice,' a perception change that may influence future procurement strategies.
The Hard Constraint of Demand
Despite clear cost-side support, downstream demand is clearly insufficient. Coastal fabric mills and material enterprises have seen a decline in inquiry and pickup enthusiasm, with a strong wait-and-see atmosphere prevailing. Rising imported yarn prices continue to squeeze fabric processing margins, and with terminal apparel orders recovering slower than expected, mills are reluctant to lock in large volumes. The price gap between domestic and imported yarns is narrowing, prompting many traders to switch to domestic yarn or lower-priced Pakistani yarn to control costs, which diverts demand away from imported yarn and limits the upside potential for further price increases. In the short term, ICE cotton futures are likely to remain volatile at high levels, with cost support continuing to underpin medium- and low-count pure cotton yarns and polyester-cotton blends from Vietnam and Indonesia, leaving room for modest price increases. However, high-count yarns above 50s will struggle to see significant gains due to weak demand. India's duty-free policy remains in effect, so the supply advantage of quality Indian yarn will persist, but the hard constraint of terminal demand means that yarn prices are unlikely to experience a unilateral surge. For domestic practitioners, it is not advisable to blindly chase high prices and hoard inventory. A more rational approach is to replenish in batches as needed, while closely monitoring ICE cotton prices, Indian CCI auction prices, and downstream fabric order changes to adjust procurement pace flexibly and hedge against operational risks from raw material fluctuations.