The global textile industry chain is currently in a complex situation where the prices of raw materials and external demand are pulling in opposite directions. On one hand, the rising prices of cotton raw materials have brought upward pressure on costs that are transmitted from top to bottom. On the other hand, China's foreign trade and import/export data have continued to improve, providing external growth momentum for the industry. The pressure on one side and the external growth boost on the other have led to a rebalancing of costs, orders, and business strategies by spinning, weaving, and downstream clothing brand enterprises in the new market environment.

This round of cotton price increase is not driven by a single factor. The weather and harvest progress in the major cotton-producing regions around the world are constantly changing the market's expectations for the supply of cotton in the new year, increasing the uncertainties in the supply side; in contrast, the consumption end of textile and clothing has not experienced a burst-like recovery, and overall terminal purchasing maintains a cautious attitude. The mismatch between supply expectations contraction and demand restraint directly creates the current market situation of cotton prices fluctuating upward, and also lays hidden risks of cost fluctuations for the entire industry chain.

The difficulty of cost transfer has tested the business resilience of enterprises

The price fluctuations of raw materials have the most direct impact on spinning mills and textile manufacturing enterprises in the midstream of the industry chain. Raw cotton is the most core raw material for textile production, and every round of change in cotton prices directly alters the purchasing budget and production costs of enterprises. However, it is easy for costs to be passed upstream, but there are numerous obstacles for cost transfer downstream.

The actual market sales of yarns, the operating load of various textile factories, the actual order volume of clothing brands, and the ability of all parties in the industry chain to absorb the pressure of price increases jointly determine which link will ultimately bear the cost of the cotton price increase. Currently, the competition in the downstream market is still intense. If the terminal orders for clothing do not follow up effectively, manufacturing enterprises will find it difficult to fully cover the additional expenses brought by the increase in raw materials through product price hikes, and their profit margins will be continuously compressed. 

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