Imported Yarn Price Surge Squeezes Chinese Weaving Mills Amid Demand Slowdown

The relentless surge in imported cotton yarn prices is squeezing Chinese weaving mills between rising costs and sluggish demand. Over the past week, FOB/CNF/CIF offers from Vietnam, India, Pakistan, and Uzbekistan have all moved higher, driven by a confluence of factors including a two-year high in ICE cotton futures during early May, persistent energy shortages, and escalating domestic cotton prices in India. Some mills in Vietnam, India, and Pakistan have even suspended forward quotations, reflecting deep uncertainty about future price direction.

Cost Push from Multiple Fronts

Raw material costs are the primary driver. The spike in ICE cotton futures quickly transmitted to the yarn market. Meanwhile, higher prices for oil, natural gas, and electricity—compounded by shortages—have further elevated processing costs. In India, continuous sharp rises in domestic cotton prices have added to the region's cost burden. The decision by some mills to halt forward offers signals that producers themselves are struggling to price in a volatile environment.

Downstream Caution Prevails

Despite the upward momentum in overseas offers, Chinese coastal weaving mills and traders—from Guangdong to Jiangsu and Zhejiang—are adopting a wait-and-see approach. Spot transactions for bonded and afloat cargoes remain subdued, limited to essential needs. The hesitation stems from a limited ability to pass on higher costs to end customers. Export orders to Europe and the US, particularly those requiring traceability, are showing slower growth. Since mid-April, US Customs has reportedly adjusted its inspection procedures related to the Uyghur Forced Labor Prevention Act, increasing the number of checks on textile and apparel shipments. This adds another layer of uncertainty for exporters already grappling with rising input costs.

Inventory Dynamics: A Mixed Picture

Port inventories of cotton yarn have edged down slightly over the past two weeks, but the decline is more a result of reduced arrivals—especially from India, Pakistan, and Uzbekistan—than a surge in demand. In contrast, sales of polyester-cotton yarn from Vietnam and Indonesia have been relatively stable. However, overall port stockpiles remain significantly higher than the average for the 2022/23 through 2024/25 seasons. This suggests that while supply is tightening at the source, the domestic market still has ample inventory to absorb, which may limit the pace of further price increases in the near term.

Practical Recommendations

For Buyers - Focus on short-term, small-lot purchases to avoid locking in high prices for forward delivery. - Negotiate with bonded stock holders, who may offer discounts due to inventory pressure. - For export orders, discuss cost-sharing mechanisms with clients and stay updated on US Customs policy changes.

For Trading Companies - Incorporate price adjustment clauses into contracts to mitigate raw material volatility. - Diversify sourcing by increasing inquiries for alternative products like Vietnam/Indonesia polyester-cotton yarn. - Strengthen monitoring of ICE cotton futures and energy policies in major producing countries to enable rapid procurement decisions.