In July 2026, domestic cotton prices consolidated narrowly while international prices rose, significantly narrowing the price gap. Meanwhile, textile and apparel exports grew for three consecutive months, hitting a yearly high in June. This combination signals that under the dual pressures of raw material costs and recovering overseas demand, the resilience of China's textile chain is being tested, and the strong export performance may set the tone for the second half of the year.
Narrowing Price Gap: Changing Cost Transmission Logic
International cotton prices trended upward in July, while domestic prices only moved narrowly, leading to a notable narrowing of the price gap. This means the cost advantage of imported cotton is diminishing, increasing cost pressure for spinning mills that rely on imports. On the flip side, the narrower gap weakens the impact of low-cost imports on the domestic market, helping stabilize domestic price expectations.
For buyers, the changing price gap directly affects raw material procurement decisions. When the gap narrows, imported cotton becomes less cost-effective, enhancing the competitiveness of domestic cotton, which may prompt some companies to shift procurement back to the domestic market. Additionally, the rise in international prices reflects a tight global supply-demand balance, suggesting prices may remain firm, urging companies to manage inventories proactively.
Three Months of Export Growth: Positive Demand Signals
Customs data show that textile and apparel exports rose for three consecutive months, with June reaching a yearly high. This growth is closely linked to restocking demand in major consumer markets. Economic resilience in the US and Europe, coupled with order shifts from Southeast Asia, supports exports. However, one must be cautious about potential base effects and exchange rate volatility behind the high growth.
The flip side of export growth is a significant increase in raw material imports. In the first half, cotton and cotton yarn imports surged by 103% and 56% year-on-year, respectively, reflecting a tight domestic supply-demand situation—production fell short of expectations while downstream demand remained robust. The import surge also means greater reliance on international markets, making cost transmission more direct when international prices fluctuate.
Industry Impact: Price Transmission from Raw Materials to Yarn
As the traditional peak season approaches, yarn price quotes have generally stabilized, consistent with the narrow movement of cotton prices, indicating that downstream acceptance of current prices is reasonable. However, the rise in international cotton prices will inevitably transmit to the yarn segment, with expectations of steady increases in Q3. For weaving and apparel companies, this implies gradually emerging cost pressures.
From a supply-chain perspective, price fluctuations at the raw material level often transmit along the chain from cotton to yarn to fabric to apparel. The current narrowing price gap reduces the cost difference between imported and domestic cotton, aiding domestic cotton destocking. Meanwhile, sustained export order growth provides demand support across the chain. This pattern of stable domestic and rising external prices is generally favorable, but requires more refined cost and inventory management.