China's cotton yarn imports up 55% YoY in Jul, with follow-up imports hinge on import margins

In the first half of 2026, China's domestic cotton prices remained persistently high, while international cotton prices were relatively low, making imported cotton yarn cheaper than domestically produced yarn. As a result, enterprises shifted toward purchasing imported cotton yarn to reduce production costs and protect profit margins.

At the same time, the continued appreciation of the RMB against the U.S. dollar further lowered the actual procurement cost of imported cotton yarn denominated in U.S. dollars, enhancing the price competitiveness of foreign yarn.

By country of origin, China's July cotton yarn imports remained concentrated in Vietnam, India, and Pakistan. Vietnam accounted for half of the total, with imports of 83,000 tonnes (50% share), followed by India with approximately 21,000 tonnes (13%), and Pakistan in third place with over 19,000 tonnes (about 12%).

In recent years, Vietnam, with its mature textile supply chain, has maintained relatively stable cotton yarn exports to China, while India and Pakistan have leveraged the high cost-effectiveness of medium-count yarn to penetrate the Chinese market. With sustained and substantial inflows of overseas supplies, competition between domestic and imported yarn has intensified.

Yet, China's yarn imports in July slightly fell compared with the previous month, partly because the domestic-international yarn price spread narrowed from earlier levels. While international cotton prices rose, domestic cotton yarn prices failed to gain momentum amid reserve cotton auctions and weak downstream demand.

Looking at August, with domestic cotton prices trading at high levels, yarn production costs have remained elevated. The domestic textile industry has yet to emerge from the off-season, with downstream grey fabrics and garments only placing sample orders, resulting in insufficient orders for the weaving sector.

Downstream buyers have largely adopted a hand-to-mouth procurement strategy. Combined with the influx of overseas cotton yarn resources, substitution pressure on domestic yarn has intensified. Given the ample supply of both domestic and imported yarn, near-term upward impetus for yarn prices have remained limited.

Looking ahead, the market holds relatively strong expectations for the traditional September-October peak-season. Should peak-season yarn demand see a tangible recovery, the currently ample yarn supply could be properly absorbed, and yarn margins may see some improvement.

However, if peak-season yarn demand falls short of expectations, yarn inventories will face greater pressure, and yarn prices are likely to remain range-bound. On the import front, if the cost advantages of cotton yarn from Vietnam, India, Pakistan, and other countries widen further, there remains room for a rebound in cotton yarn imports. Conversely, if international cotton prices continue to rise, pushing up overseas yarn quotations, import growth could be curbed.