Reserve cotton auctions entered their ninth trading day, and the signal from the market remains clear: whatever is listed gets bought. On September 2, all 8,004 tons of cotton offered for sale were transacted, with an average price of 17,533 yuan per ton, down a marginal 36 yuan (0.2%) from the previous day. This near-zero price movement, combined with a sustained full clearance rate, points to a delicate balance in the cotton market—buyers have demand but are reluctant to chase higher prices, while the seller's supply pace is steady but lacks flexibility.
Structural Divergence in Auction Data
A closer look at the September 2 transaction details reveals a notable divergence in premium levels between imported and Xinjiang cotton. On that day, imported cotton averaged a premium of 956 yuan per ton, while cumulative data through September 2 shows imported cotton premiums of 1,496 yuan and Xinjiang cotton premiums of 1,147 yuan. The persistently higher premium for imported cotton suggests that mills producing high-count yarns and high-quality fabrics remain heavily reliant on imported fiber, and domestic cotton has yet to fully substitute in certain high-end applications.
Cumulatively, as of September 2, 264,692 tons of reserve cotton had been listed, with a 100% transaction rate. The average price was 17,291 yuan per ton, equivalent to 17,941 yuan per ton on a 3128B basis. This price level is close to the current spot market, indicating that the reserve cotton pricing mechanism is serving as an anchor—neither deeply discounting to disrupt the spot market nor overpricing to dampen demand. For textile mills, reserve cotton provides a relatively stable supplementary supply channel, especially when import quotas are tight.
Supply-Demand Logic Behind Narrow Price Swings
Transaction prices have hovered narrowly around 17,500 yuan per ton for consecutive days, with the spread between the highest and lowest prices reaching 1,810 yuan. This range reflects significant quality premiums across different grades and origins. Notably, on September 2, the highest transaction price was 18,380 yuan, while the lowest was 16,570 yuan, indicating intense competition for high-grade cotton while lower grades saw tepid demand.
The implication for buyers is clear: rather than fixating on the average price, they should focus on the actual transaction range for the grades they need. As reserve sales move into their second half, with a daily listing pace of around 8,000 tons, the remaining available resources will gradually shrink. For mills that have not yet completed restocking, competitive pressure in subsequent auctions may rise; those with established inventories can more calmly observe market changes before the new cotton crop arrives.
Transmission Effects on the New Cotton Market
The full clearance rate also signals that textile mills' raw material inventories are not ample. Ahead of the traditional 'golden September and silver October' order season, mills are actively bidding for reserve cotton to lock in quantities and prices for second-half production. If this restocking behavior persists, it could support the opening price of the new cotton crop. However, caution is warranted: if downstream orders disappoint, cotton acquired at high premiums could become an inventory burden.
Regional feedback indicates that mills in cotton-textile clusters such as Shandong and Henan are actively participating, consistent with rising yarn mill utilization rates in those areas. In contrast, mills in Jiangsu and Zhejiang prefer imported cotton, reflecting their mid-to-high-end product mix. This regional divergence means that reserve cotton policy impacts vary across market segments, and companies should tailor procurement strategies to their product positioning and customer orders rather than simply following market sentiment.
Outlook and Operational Recommendations
In the short term, reserve cotton transaction prices are likely to remain range-bound, with upward momentum requiring substantive downstream demand improvement and downward adjustments potentially attracting more bidders. In the medium term, key variables include the progress of the new cotton harvest, the issuance of sliding-scale quota, and international cotton price trends—these will collectively determine the direction of the cotton market in Q4.