US-based Elevate Textiles' denim fabric brand Cone Denim stated on September 3, 2026 that it will stop denim production in China by the end of 2026 and concentrate its manufacturing resources in Mexico. Its Jiaxing plant (Kanglong Textile), located on Gangshan Road in the Jiaxing Economic Development Zone, was established in 2005 and began production in 2007, with an investment of RMB 800 million, covering the full process of spinning, weaving, dyeing and finishing, and post-finishing. At its peak it had nearly 1,000 employees, and later about 500 were covered by social insurance. The plant is negotiating placements under the N+1 formula, with compensation for long-serving employees of roughly RMB 100,000 to 200,000. Business registration information still shows the company as active, so this is not a sudden bankruptcy.

Key Points

  • Cone Denim stated on September 3, 2026 that it will exit Chinese denim production by the end of the year, concentrating manufacturing resources in Mexico, with about 500 insured employees at the Jiaxing plant placed under the N+1 formula.
  • The plant was established in 2005 and began production in 2007; Elevate Textiles invested RMB 800 million, making it a benchmark foreign-funded textile project introduced as a local priority.
  • Under the USMCA "yarn-forward" rules of origin, industry estimates show that US$1 million worth of compliant goods entering the US can enjoy zero tariffs, saving about US$365,000 compared with shipping from China and about US$290,000 compared with Vietnam.

From a Landmark Foreign-Invested Project to Headquarters Recalculating Capacity

Cone Denim was founded in 1891 and became a fabric supplier for Levi's 501 jeans in 1915. Its US domestic plants subsequently closed one after another, and it entered Jiaxing in 2005. In 2024 the plant was still installing solar power and upgrading ozone water-saving and dyeing and finishing equipment; the shutdown was announced just after the equipment upgrade was completed. There are rumors of cash flow and parent company operating problems, but this production halt is essentially the headquarters rethinking its global capacity.

Triple Pressure from Dyes, Tariffs and Rules of Origin

Dye costs are the first pressure. According to August 2026 data from Yicai and Securities Times, H-acid rose from about RMB 45,000 per ton to nearly RMB 120,000 per ton, with reactive black and other dyes rising in tandem; reducing agents rose from about RMB 25,000 per ton at the end of 2025 to RMB 70,000-100,000 per ton in 2026, and disperse black transaction prices approached RMB 25,000 per ton. Printing and dyeing plants in Shaoxing and Jiangsu reported overall cost increases; traditional printing and dyeing has thin margins, and price increases are hard to pass downstream. Denim requires dyeing, washing and finishing, and dyes are only one part of the process. Zhejiang printing and dyeing processing fees subsequently rose, with environmental, energy and labor costs adding another layer, continuously squeezing the profit space of export-oriented fabric mills.

Tariffs and rules of origin are even more critical. More than 90% of Kanglong's goods are shipped to the US, and Chinese-made denim fabric faces additional tariffs and trade uncertainty; Mexico can use USMCA, under which apparel qualifies for zero-tariff entry into the US under the "yarn-forward" rule only if yarn spinning, weaving, cutting and sewing are all completed within the US-Mexico-Canada region. Using US or Mexican yarn and weaving and finishing locally makes it easier to obtain origin qualification; if Chinese yarn is still purchased, even weaving in Mexico may not be compliant. On lead times, Jiaxing to the US West Coast via the Pacific usually takes 3-4 weeks, with further delays during peak season and port congestion; from Puebla and Guanajuato in Mexico to US distribution centers by truck takes only 3-5 days, and near-shoring replenishment can reduce brands' safety stock. The recent push toward near-shoring by US apparel brands is precisely because of faster replenishment, lower tariffs and less inventory buildup when orders fluctuate.

Capacity Clearing and the Retention of the Fabric Segment

Similar adjustments are not isolated. Ningbo Esquel was established in 1993, mainly making high-end pure cotton shirts as an OEM for international brands, and fully ceased production on June 1, 2026, with orders diverted to Xinjiang, Guilin and Southeast Asia; the official line was nationwide capacity optimization and divestment of pure garment OEM work. The two differ in segment, but both are stuck in a situation where "customers are overseas, standards are overseas, and profits depend on scale."

Data from the National Bureau of Statistics show that in January-May 2026 there were 12,545 textile, apparel and accessories enterprises above designated size, a net decrease of 1,101 year on year; textile enterprises above designated size totaled 20,806, a net decrease of 389 year on year. Weaving operating rates fell to around 54% at one point in the first half, with small orders, functional fabrics and cross-border e-commerce orders relatively full, while old plants doing pure bulk OEM work came under pressure. But clearing does not mean China's fabric sector has lost its advantage. Data from the China Chamber of Commerce for Import and Export of Textiles show that in the first half of 2026 yarn and fabric exports totaled US$42.68 billion, up 2.8% year on year, of which yarn was US$8.07 billion, up 8.1%, and fabric was US$34.61 billion, up 1.7%, with a large share flowing to Vietnam, Bangladesh and Cambodia for garment production.

The sewing segment is moving out, but yarn, greige fabric and functional dyeing and finishing are hard to relocate in tandem. The judgment of fabric industry players in Jiangsu and Zhejiang is that basic denim bulk orders for US brands will increasingly favor near-shoring in Mexico, while directions such as recycled fibers, water-saving dyeing, special slub, selvedge and small-batch sampling have a more complete domestic supply chain. The dye side is also diverging: Longsheng, Runtu and Jihua, which have integrated production capacity for reducing agents and H-acid, are less affected by price increases, while plants that only buy commodity dyes for OEM dyeing and finishing find it difficult to pass on costs. The roughly 500 skilled workers, denim craftsmanship and dyeing and finishing quality control experience left behind by Kanglong mean some orders will shift to other domestic denim mills and some will follow capacity to Mexico, showing that this round is not simply a labor cost issue but a simultaneous recalculation of intermediate supply, printing and dyeing environmental rules, tariff origin rules and customers' replenishment rhythms.

Source: A plant with a thousand workers halts production, another giant to withdraw from China! Once a local priority foreign-invested benchmark_Tencent News · Originally published 2026-09-29