China imported 210,000 tons of cotton yarn in March 2026, a month-on-month increase of over 60% and a year-on-year surge of 65.7%. The first-quarter total reached 510,000 tons, up 49.8% year-on-year. These figures underscore the textile supply chain's response to cost pressures, shifting trade patterns, and evolving downstream demand.
Cost Inversion Drives Import Substitution
The cost advantage of imported cotton yarn is widening. Domestic 328-grade cotton prices hovered around 16,500 yuan per ton in Q1 2026, while landed prices of Indian and Vietnamese cotton yarn were roughly 14,500 yuan per ton—a spread exceeding 2,000 yuan. For weaving mills, direct purchases of imported yarn save over 10% on raw material costs compared to spinning domestic cotton.
This cost dynamic is clearly reflected in import volumes. For the 2025/26 season (September 2025 to March 2026), cumulative imports reached about 1.1 million tons, up 31% year-on-year. Imported yarn now accounts for a rapidly growing share of total domestic cotton yarn supply, significantly displacing locally produced yarn.
Downstream Demand Recovers Unevenly
The destination of imported yarn reveals the health of end markets. Knitting clusters in Guangdong and Zhejiang saw purchases of imported compact and siro yarns increase over 50% month-on-month, driven by orders for fast-fashion items like sweatshirts and T-shirts. In contrast, demand for home-textile yarn in southern Jiangsu and Shandong remained flat, growing far slower than apparel-grade yarn.
This divergence suggests the import surge is not a broad-based recovery but a temporary boost from apparel export orders. Post-Chinese New Year, Western retailers began restocking, with some orders shifting back to China from Southeast Asia. However, home textiles and industrial fabrics have yet to show synchronous recovery.
Trade Flow Restructuring and Cluster Responses
The origin of imported yarn is also shifting. In Q1 2026, Indian cotton yarn exports to China surged over 80% year-on-year, while Vietnamese exports rose about 45%. India, leveraging its low-cost cotton, is regaining market share in China. Exports from Pakistan and Uzbekistan also grew, albeit more modestly.
In response, domestic spinning mills in Shandong and Henan are accelerating product differentiation. They are reducing output of standard 32s and 40s counts and shifting toward high-count, blended, and functional yarns. Some mills have proactively lowered operating rates to manage inventory.
Outlook and Risks
The import surge is likely to continue into Q2. Domestic new-cotton planting area is expected to shrink by about 5%, tightening local supply and maintaining the cost advantage of imported yarn. However, two risks loom: a potential slowdown in Western orders after May could lead to inventory buildup, and any depreciation of the yuan from its current 6.85 level would erode import cost benefits.