Reserve Cotton Auction Heat Persists: 100% Turnover in Early September, What Does the Premium Signal?

From August 31 to September 4, the weekly average price of reserve cotton auctions settled at 17,520 yuan per ton, with a 100% turnover rate for consecutive weeks. This price is 220 yuan higher than the cumulative average of 17,300 yuan since the launch on July 20, an increase of about 1.3%. Behind this seemingly moderate rise lies a structural thirst for high-grade cotton among textile mills—during the week, Xinjiang cotton's converted 3128 price reached 18,359 yuan/ton with a premium of 1,131 yuan, significantly higher than imported cotton's 941 yuan. This data reveals that domestic premium cotton is gaining pricing power in competitive bidding.

Background

The current round of reserve cotton releases began on July 20. As of September 4, cumulative listings and transactions both stood at 280,718.02 tons, with the turnover rate consistently at 100%. This means every batch of listed resources was fully bid, and market absorption exceeded expectations. The cumulative average price was 17,300 yuan/ton, with a converted 3128 price of 17,949 yuan and an average premium of 1,365 yuan, indicating a stable valuation center for reserve cotton without significant cooling despite continuous releases.

Notably, Xinjiang cotton and imported cotton showed divergence in bidding. Cumulatively, Xinjiang cotton averaged 16,997 yuan/ton with a premium of 1,147 yuan, while imported cotton averaged 17,415 yuan with a premium of 1,447 yuan. Imported cotton's higher absolute price and premium reflect mill preferences for its length and strength, particularly for high-count yarns or export orders. However, in the weekly data, Xinjiang cotton's premium surpassed imported cotton, suggesting a short-term tightening of domestic high-grade supply and more aggressive competition for Xinjiang resources.

Industry Impact

Geographically, Shandong, Jiangsu, and Hunan ranked top three in transaction volume, together accounting for 2.3 million tons, or 57.28% of the weekly total. Shandong and Jiangsu are traditional textile powerhouses with large spinning capacity, and their purchasing activity directly reflects downstream operating rates. Hunan's presence may relate to its recent role in central China's textile industry transfer, with new spinning capacity creating steady demand. This regional concentration suggests raw material traders should prioritize clients in these provinces and align logistics and warehousing accordingly.

Changes in premiums have transmission effects upstream and downstream. For mills, an average price of 17,520 yuan implies a cotton cost that may exceed current spot quotes, signaling that bidders hold a bullish view and are willing to pay premiums to secure supply. For upstream ginners and traders, high turnover and premiums provide a floor for new-crop seed cotton prices, likely keeping opening prices firm. However, if downstream fabric and garment orders fail to recover synchronously, high raw material costs could compress mill margins, potentially triggering a wait-and-see stance.

Practical Recommendations

For Purchasers - Monitor release pace and price changes; if weekly premiums narrow, consider slowing purchases for potential pullbacks. - When the Xinjiang-imported cotton spread fluctuates, prioritize cost-effective options; for instance, if Xinjiang premiums exceed imported, increase import quota usage. - Establish long-term relationships with traders in major regions like Shandong and Jiangsu for timely auction information and logistics support.

For Foreign Trade Enterprises - Base export quotes on reserve cotton average prices as a raw material benchmark, leaving room for exchange rate and freight fluctuations to avoid margin erosion. - If clients specify Xinjiang cotton, track its premium trends and sign long-term supply agreements early to lock in resources. - Utilize public reserve release data to optimize purchase timing, replenishing during weeks with lower premiums to reduce overall costs.