Domestic cotton prices rose last week, and 100% cotton yarn futures prices followed suit, while spot market prices for 100% cotton yarn remained stable for the time being. As of July 3, the reference spot price for 21S ring-spun 100% cotton yarn in Shandong Province was around 23,400 RMB/ton, and the reference spot price for 32S ring-spun 100% cotton yarn was around 24,725 RMB/ton—levels unchanged from the week before last.

Market Overview:

Although cotton prices rose last week, spot prices for cotton yarn faced significant upward resistance; downstream markets adopted a wait-and-see attitude, resulting in sluggish trading. Concerned about the buildup of finished product inventories, spinning mills generally kept prices stable, focusing instead on maintaining sales volume. Large and medium-sized mills saw steady inflows of new orders and fulfilled deliveries accordingly, whereas small mills faced mounting operational pressure and continued inventory accumulation—with some stocks exceeding 30 days' supply—forcing them to either hold prices steady or offer price concessions to boost sales. Overall operating rates at spinning mills remained relatively stable, though some smaller mills curtailed production due to profit margin pressures.

Imported Yarn:

According to feedback from some import-export companies, following a continuous decline in cotton yarn quotes during the latter half of June, most trading firms dealing in imported yarn have seen their profit margins squeezed by mounting warehousing and financing costs. Consequently, traders show little enthusiasm for lowering prices to move stock, resulting in a standoff between buyers and sellers. With the recent rise in ICE cotton futures, there is growing intent among suppliers in Vietnam, India, Pakistan, Bangladesh, and Indonesia to raise export quotes for cotton yarn, and some spinning mills have reduced their listings or quotes for futures-based yarn sales. Operating Status: The impact of the off-season persists; yarn shipments have slowed, and inventory pressure remains high. However, operating rates in the pure cotton yarn sector have remained relatively stable. Statistics show that for the week of June 26-July 2, the operating rate of domestic pure cotton yarn enterprises stood at 69.51%, unchanged from the previous week.

Inventory Status:

The impact of the off-season remains pronounced, and downstream demand shows no significant improvement; restocking is largely driven by immediate needs. Cotton textile enterprises are seeing limited consumption of finished yarn, and inventories of finished goods have recently remained at elevated levels. Statistics indicate that as of July 2, finished goods inventory in the domestic pure cotton yarn sector stood at 30.59 days, remaining flat month-on-month.

Regarding profit margins:

Last week, the domestic cotton market exhibited a trend of significant volatility with an upward bias. Amid a market landscape characterized by rising raw material costs and stable yarn prices, spinning margins came under noticeable pressure, particularly for spinning enterprises in the interior regions. Statistics show that the spot profit margin for C32s ring-spun yarn produced by interior enterprises fell from -995.88 RMB/ton on June 26 to -1,457.88 RMB/ton on July 2, resulting in widened losses; meanwhile, spinning margins in the Xinjiang region dropped from 490.36 RMB/ton on June 26 to 11.56 RMB/ton on July 2, likewise reflecting a deteriorating trend.

On the demand side:

Demand in the greige fabric market has recently been sluggish, with a lack of new orders leading to some softening in prices. Downstream buyers are purchasing only as needed, causing greige fabric inventories to steadily accumulate; consequently, weaving mills are lowering operating rates to cut production. Prices for standard greige fabrics remain stable but negotiable, while prices for high-count combed greige fabrics remain relatively firm. Overall order volumes at dyeing mills are currently declining, with production schedules relying on earlier orders; compounded by an off-season market that is more severe than in previous years, an increasing number of large dyeing mills are suspending operations.

Market Outlook:

The yarn market remains in its off-season, and inventory pressure on spinning mills is gradually mounting; consequently, mills are expected to scale back production based on their individual circumstances. Prices for pure cotton yarn are projected to fluctuate within a specific range in the short term.

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