In early May, a new wave of price hikes hit the FOB/CNF/CIF offers for imported cotton yarn from major producing countries including Vietnam, India, Pakistan, Uzbekistan, Indonesia, and Bangladesh. Despite weak spot market transactions, prices for open-end and low-count ring-spun cotton yarns were broadly raised. The underlying driver is not demand recovery but a dual squeeze from upstream costs and energy supply.
Cost Pass-Through: From Cotton to Energy
ICE cotton futures hit two-year highs in the first half of May, directly raising mills' raw material costs. Meanwhile, prices of oil, natural gas, and electricity continued to climb, with some regions facing supply shortages. India's domestic cotton prices surged sharply, further intensifying cost pressures. A major textile import-export company in Zhejiang reported that severe cost volatility has forced some mills in Vietnam, India, and Pakistan to suspend or halt quotes, especially for forward shipments. This is essentially a 'hold-and-wait' strategy—mills fear locking in prices only to see further cost increases. Notably, the price rally is not broad-based. Inquiries and shipments for open-end and low-count ring-spun yarns remain sluggish, indicating weak downstream demand. The price hikes are supply-side actions rather than demand-driven.
Downstream Caution: Traceability Pressure and Cost Acceptance
Weaving mills and traders in coastal regions are in a dilemma. On one hand, rapidly rising dollar-denominated yarn prices compress margins. On the other hand, growth in traceable orders for the U.S. and EU markets is slowing. Some exporters report that since mid-April, U.S. Customs has adjusted inspection methods under the Uyghur Forced Labor Prevention Act, with a noticeable increase in the number of batches inspected, especially textiles and apparel. This adds uncertainty even for compliant imported cotton yarn, discouraging stockpiling. As a result, buyers are adopting a wait-and-see approach toward port-bonded and afloat yarns, except for essential needs. This 'bullish but not chasing' sentiment reflects the market's core tension—buyers acknowledge cost-driven price hikes but refuse to pay for potential policy risks.
Port Inventories: Slight Decline but Still Elevated
Surveys indicate that port cotton yarn inventories have edged down over the past two weeks. The decline is mainly due to reduced arrivals from India, Pakistan, and Uzbekistan, while Vietnam and Indonesia's polyester-cotton yarn sales were merely modest. However, current inventory levels remain significantly higher than the same periods from 2022/23 to 2024/25. This suggests that earlier stock accumulation has not been fully absorbed, and the market's oversupply situation persists. High inventories combined with cautious buying mean that if overseas offers soften, port stocks could face heavy destocking pressure. Conversely, if overseas prices remain firm, spot holders may gain some pricing power.
Near-Term Outlook: High Volatility, Direction Depends on Policy and Energy
In summary, the imported cotton yarn market has entered a tug-of-war between cost-driven price increases and demand constraints on acceptance. The near-term direction hinges on two variables: whether ICE cotton can sustain its highs, and whether U.S. Customs enforcement of the UFLPA tightens further. Energy shortages are unlikely to ease soon, providing cost support for mills. But if downstream willingness to accept prices remains low, the upside will be capped.