The recent surge in imported cotton yarn prices is pushing the upstream-downstream dynamics of the textile supply chain to a delicate equilibrium. In the first half of May, ICE cotton futures hit a two-year high, combined with rising global energy costs (oil, gas, electricity) and a continuous sharp increase in Indian domestic cotton prices. This has led to a comprehensive price hike in FOB/CNF/CIF quotes for cotton yarn from major producing countries including Vietnam, India, Pakistan, Uzbekistan, Malaysia, Indonesia, and Bangladesh. Even lower-demand items like open-end and low-count ring-spun yarn have been forced to follow the uptrend, creating a strong bullish sentiment in the market.
The 'Three Mountains' of Cost Pressure
The driver behind this price surge is not demand recovery but typical cost-push inflation. First, the strong performance of ICE cotton futures has directly raised the global pricing benchmark for cotton textile raw materials, significantly increasing mills' procurement costs. Second, energy shortages persist in Southeast and South Asia, with rising natural gas and electricity prices not only increasing direct production costs but also affecting factory operating rates and delivery stability. Finally, India's domestic cotton price surges have a price linkage effect on countries like Pakistan and Vietnam that rely on imported Indian cotton.
Notably, facing sharp cost increases, some mills in Vietnam, India, and Pakistan have chosen to suspend or even halt cotton yarn quotations, especially for forward shipments. This 'hoarding' behavior reflects mills' uncertainty about future prices and further tightens supply elasticity.
The 'Triple Pressure' on Downstream
However, the price transmission to downstream weaving mills and traders has encountered significant resistance. Coastal regions, particularly Guangdong, Fujian, Jiangsu, and Zhejiang, are under triple pressure from soaring costs, weak orders, and policy risks.
From a cost perspective, the rapid and continuous upward adjustment of overseas quotes has exceeded the acceptance and digestion capacity of most buyers. For weaving enterprises with thin margins, sharp raw material fluctuations significantly amplify order-taking risks. On the demand side, growth in export orders for the European and American markets is slowing. More alarmingly, some exporters report that since mid-April, US Customs has adjusted its inspection methods under the Uyghur Forced Labor Prevention Act, leading to more inspections, with textile and apparel products accounting for a larger share. This increases both compliance and time costs, further suppressing the recovery of external demand.
Consequently, coastal buyers, beyond essential restocking, are largely adopting a wait-and-see approach towards bonded port and shipment yarn. Market transactions are subdued, with buyers and sellers in a stalemate.
High Inventories and Structural Imbalances
Looking at port inventories, total cotton yarn stocks at major ports have edged slightly lower over the past half-month. The relatively stable demand for Vietnam and Indonesia's polyester-cotton yarn, along with a slight decline in arrivals of Indian, Pakistani, and Uzbek yarn compared to April, contributed to this decline. However, current inventory levels remain significantly higher than the same period in the 2022/23 to 2024/25 seasons.
High inventories combined with weak demand suggest that even if overseas quotes remain firm, actual transaction prices in the domestic spot market may not fully follow the uptrend. Traders face the dilemma of 'buying high and selling low' or 'having a price but no market', which will in turn dampen new import orders.