Raw Material Trends in the Apparel Industry: H2 2026 Outlook

H1 Review: The Oil-Driven Cost Shock

The first half of 2026 brought a seismic shift to the apparel industry. Geopolitical tensions in the Middle East sent crude oil soaring to around $95 per barrel, triggering a rigid cost transmission chain: crude oil → PTA/MEG → polyester fiber → finished garments.

The impact on chemical fiber prices was severe:

A standard mid-range jacket costing 500 RMB saw its raw material cost rise by nearly 40 RMB. The impact rippled through India’s textile hub of Surat, where industry losses were estimated at ₹2,500–3,000 crore within just 60 days, and weaving units operated at nearly half their installed capacity.

H2 Trends: Divergence and Opportunity

1. Polyester Chain: Peak Season Ahead

Key data points:

• Crude oil at $95/barrel: Raw material costs remain elevated; India’s textile industry has called for temporary zero customs duty on yarn until crude stabilizes below $65/barrel.
• Inventory levels: Polyester filament industry inventory sits at 26.8 days, PTA social inventory has dropped from 2.136 million tons to 2.053 million tons, both near multi-year lows.
• Operating rates: Downstream weaving and texturing plants are ramping up—operating rates have reached 75% and 62% respectively as the “Golden September, Silver October” peak season approaches.

The outlook: With low inventory levels and the traditional peak season underway, polyester prices are positioned to hold firm, though downstream fabric mills remain cautious in their purchasing.

2. Spandex: From “MSG” to “Essential”

Spandex has seen one of the most remarkable shifts. Demand structure has upgraded significantly—fabric blend ratios have increased from 3-6% to 8%, driven by growth in medical textiles, automotive interiors, and athleisure. Industry consolidation has accelerated, with net capacity growth turning negative in 2026 as outdated capacity exits the market.

Key data points:

• Inventory: Spandex mill inventory stands at 36 days, down 14 days from the start of the year.
• Price spread: Spandex 40D margin has widened by over 5,000 RMB/ton since the start of the year.
• Consumption: H1 2026 spandex apparent consumption reached 644,000 tons, up 10.6% year-on-year.

The outlook: With low inventory and strong demand growth, spandex is expected to maintain upward price momentum through Q3.

3. Dyes: Strong Cost Push Continues

Key data points:

• Reductant price: From 25,000 RMB/ton at end-2025 to over 100,000 RMB/ton in H1, reaching 120,000 RMB/ton in July—a 380% increase.
• Dye inventory: Trade and mill inventories are below 15 days across the industry, with most reductant stocks effectively depleted.
• Disperse Black 300%: Market price has approached 30,000 RMB/ton.

The outlook: As H-acid prices also remain elevated at historical highs, dye costs are expected to maintain strength through Q3, putting pressure on fabric mills facing limited pricing power.

4. Cotton: Global Supply Tightens

• US cotton: As of August 25, approximately 52% of US cotton-growing areas were affected by drought, with Texas reaching 72%, up 13 percentage points month-on-month.
• Price movement: Cotton has risen ~18% year-to-date, with Xinjiang cotton leading gains and the domestic-foreign price spread at near decade-high levels.

The outlook: Global supply tightening suggests cotton prices will remain well-supported, benefiting upstream producers with adequate inventory.

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Impact on the Apparel Industry

Winners and Losers

The cost wave has created a stark divide across the industry:

Key Consideration: Cost Transmission Lag

Industry patterns indicate that raw material price movements have a 3-4 month lag before hitting consumer prices. The surge in March directly affects pricing for Summer 2026 and Fall/Winter 2026 collections. If crude remains elevated, a 5-15% price increase on apparel across the board is likely.

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Strategic Takeaways for Garment Manufacturers

✅ Lock in materials early – With inventory levels low and peak season demand approaching, securing raw materials at current levels is advisable before further price hikes.

✅ Monitor currency and trade policy – The US and EU remain key export markets; exchange rate shifts and tariff developments will impact profitability.

✅ Manage own inventory – Downstream inventory remains high in some segments; align production carefully to avoid overstocking as the peak season advances.

✅ Differentiation matters – Fabric mills and manufacturers with differentiated products and stable quality maintain better pricing power with their downstream customers.

The second half of 2026 is shaping up to be a period of divergence—opportunity for the prepared, pressure for the rest. Those with cost buffers, production flexibility, and strong client relationships are best positioned to navigate the volatility ahead.

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