The main contract for cotton futures experienced a sharp 'surge and retreat' within just a few weeks, falling from a high of 16,140 yuan per ton to 15,615 yuan per ton, an amplitude of over 3%. However, this is not an isolated event, but a concentrated projection of the 'destocking' pains across the entire cotton textile chain. The latest survey from the China Cotton Textile Association shows that from raw materials to fabrics, almost every link is simultaneously feeling the pressure of shrinking orders and rising inventories. Whether demand can recover in the third quarter has become the industry's focal point.
Raw Material End: Cost Support Diverges, Transmission Chain Cracks
The cotton market experienced a typical 'emotion-driven, fundamentals-corrected' cycle. The US-Iran agreement initially boosted external markets, driving Zhengzhou Cotton Futures higher. However, as macro sentiment faded, the reality of the downstream cotton yarn off-season quickly pulled prices back. Public industry data indicates that cotton prices are currently in a narrow range-bound consolidation, lacking substantial industrial drivers.
The trend for polyester staple fiber was more dramatic. After Strait of Hormuz shipping recovered to 60% of pre-conflict levels, the crude oil premium was almost entirely given back, triggering a catch-up decline in the polyester chain. Polyester staple fiber futures fell to around 6,900 yuan per ton. This means that raw material inventories hoarded earlier due to geopolitical risks are rapidly depreciating, completely undermining cost support for downstream polyester-blended yarns.
Viscose staple fiber was the only variety showing tight supply. Factories reduced rebates, traders raised prices, and the tight delivery situation is unlikely to ease in the short term. However, a warning sign is that downstream viscose yarn prices have not strengthened concurrently; instead, they are weak. This suggests that terminal demand has very limited capacity to absorb cost increases. The 'upstream rises, downstream falls' scissors gap is squeezing yarn mill profits.
Yarn Sector: Off-Season Plus Destocking, No Category Spared
The pure cotton yarn market continues a pattern of 'sticky prices, concessional transactions.' Although mill quotations haven't been significantly adjusted, actual transaction prices in the trading segment have fallen to low levels, and finished product inventories are still slowly climbing. Signals such as declining downstream weaving operating rates, grey fabric inventory buildup, and the lack of volume in autumn/winter orders all point to one judgment: the 'active destocking' phase for cotton yarn is far from over.
The off-season characteristics for vortex-spun yarn and color-spun yarn are even more pronounced. Vortex-spun viscose yarn and polyester-viscose yarn are experiencing both volume and price declines, with mills relying on small orders to maintain production-sales balance. For color-spun yarn, destocking pressure on regular varieties is high, with only high-count differentiated products showing relatively stable demand. Differentiated yarn, though running at full capacity, relies on small, scattered orders with poor continuity, and price competition is further squeezing profits.
Polyester-blended yarns are hit hardest by the raw material crash. The US-Iran agreement triggered a sharp drop in polyester staple fiber prices, pulling yarn prices down. Downstream buyers turned cautious, purchasing only for immediate needs, leaving mills with unsaturated orders and mounting inventory pressure. Viscose yarn is caught in the dilemma of 'rising raw material costs, falling yarn prices,' with slow sales and few new orders.
Fabric End: Operating Rates Decline, Export Environment Uncertainty Rises
The grey fabric market has seen a comprehensive slowdown in shipment pace, with orders dominated by small, quick-turnaround lots. Finished product inventories are continuously accumulating. Weaving mills are adopting a hand-to-mouth procurement strategy for raw materials, with extremely low willingness to build inventory. This effectively passes inventory pressure back up to the yarn sector. The yarn-dyed fabric market is also slowing. Raw cotton prices have dropped by about 300 yuan per ton, and high-count pure cotton yarn prices have fallen by about 180 yuan per ton. Fabric prices are loosening in some areas, and profit margins have become extremely thin.
In the denim sector, the ex-factory price of 10s count pure cotton OE yarn remains narrowly range-bound at 14,600 yuan per ton. Both domestic and export markets are sluggish. More notably, the continued strengthening of the US dollar index adds extra pressure on export-oriented denim companies. The combination of exchange rate risk and shrinking demand for foreign trade orders forces companies to closely monitor export trends.