Exports hit a yearly high in June while cotton imports doubled in H1—a seeming paradox that actually reflects a common logic: overseas restocking cycles and China's supply chain resilience are resonating ahead of the peak season.
Supply-Demand Dynamics Behind the Data
Customs data show textile and apparel exports rose for three consecutive months, with June reaching the year's peak. This deviates from the usual off-season weakness, indicating orders are driven by solid restocking after inventory drawdowns, not just seasonal effects.
Meanwhile, cotton imports surged 103% year-on-year in H1, and cotton yarn imports grew 56%, far exceeding expectations. The surge stems from a widening domestic supply gap—weather disruptions and reduced acreage in Xinjiang limited output growth—while relatively low international cotton prices encouraged spinners to lock in cheap raw materials.
The cotton price gap between domestic and international markets narrowed notably in July, as domestic prices consolidated narrowly and international prices rose. A narrower gap reduces the cost advantage of imported cotton, but previously contracted low-priced cargoes are still arriving, so import volumes won't drop immediately.
Chain Transmission and Regional Responses
Yarn quotes stabilized, reflecting the industry's direct response to raw material changes. With the peak season approaching, spinners are reluctant to cut prices, while weavers and garment makers remain cautious about high-priced yarn, leading to a stalemate.
In industrial clusters like Keqiao and Shengze, fabric mills report more inquiries but actual orders are mostly short-run and urgent. This suggests brands are testing the waters rather than committing to large orders, demanding greater supply chain agility.
The influx of imported yarn pressures small and medium spinners. In low-mid count yarns, imported products retain clear price advantages. Some coastal mills are shifting to high-count, high-density or differentiated blends to avoid homogeneous competition.
Outlook for H2
Sustained export growth and high import volumes point to a "stable total volume, structural divergence" pattern in H2. Total output should grow on recovering external demand and domestic consumption, but companies with strong cost control and client relationships will benefit more, while smaller OEMs may face order diversion.
Cotton prices are likely to stay stronger internationally and stable domestically. International prices face volatility from dollar movements and weather in major producing countries; domestic prices are capped by reserve sales and import quota policies. Spinners should adopt a strategy of batch purchasing and forward locking to avoid one-sided bets.
Practical Recommendations
For Sourcing Managers - Monitor the domestic-international cotton price gap; when it narrows below RMB 500/ton, prioritize domestic cotton to reduce logistics and FX risks. - Use futures for hedging, locking in cotton costs for the next 3-6 months, especially increasing lock-in ratios a month before the peak season. - For imported cotton yarn, sign long-term agreements with suppliers to mitigate shipment delays and price fluctuations.
For Exporters - Deepen relationships with existing clients by offering small-lot, fast-turnaround flexible supply to meet brands' trial orders. - Expand into RCEP member markets to leverage tariff advantages and reduce reliance on US and European markets. - Manage RMB exchange rate risks by using forward settlement tools to protect profit margins.
In summary, the industry is at a critical pre-peak window. Strong export data boost confidence, but the pressure from surging imports cannot be ignored. Companies must balance raw material costs, order structure, and market diversification to seize H2 opportunities.