16,500 yuan per tonne — a level the market had treated as near-term psychological support — was touched intraday by Zhengzhou cotton's main 2701 contract on September 10. The 1.14% decline pushed the trading centre to a one-month low. What matters more than the drop itself is the signal of simultaneous weakening on both supply and demand sides: reserve cotton is being steadily released to fill the resource gap, while peak-season orders have yet to materialise.
Supply Side: Steady Reserve Releases as New Crop Nears
We are currently in the transition period between the exhaustion of old-crop cotton and the large-scale arrival of new crop. According to industry public data, reserve cotton is being released at a pace of roughly 8,000 tonnes per day, effectively bridging the resource gap before new crop hits the market. On September 9, reserve cotton sales resources totalled 8,006.7590 tonnes, with actual sales of 8,006.7590 tonnes — a 100% sales rate. The average transaction price was 17,388 yuan per tonne, up 48 yuan from the previous day, while the converted 3128 price was 18,091 yuan per tonne, up 151 yuan day-on-day.
The 100% sales rate indicates genuine rigid demand for reserve cotton at current price levels. However, the modest rise in average transaction prices also reveals that mills are becoming more rational in their bidding — the panic-buying sentiment has clearly cooled, and companies are no longer rushing to restock.
Meanwhile, Xinjiang's new crop boll-opening rate has exceeded 30%, and the listing window is approaching. Hedging pressure from the concentrated arrival of new cotton is gradually emerging — a core factor capping upside for Zhengzhou cotton. For ginners, the matching rhythm between new-crop opening prices and futures hedging windows will directly determine whether their purchasing strategy is aggressive or conservative.
Demand Side: A Lacklustre Peak Season Disrupts Procurement Plans
The traditional "Golden September and Silver October" peak season has been subdued this year. Although loom operating rates have recovered somewhat and finished goods inventories are being drawn down, end-user orders have not yet been released in volume. Companies are mainly making just-in-time purchases, and wait-and-see sentiment is rising.
The transmission logic here is worth unpacking: cautious ordering by end-user apparel brands discourages weaving mills from stockpiling; their reduced procurement in turn suppresses yarn shipment rhythms at spinning mills. High yarn inventories further limit Zhengzhou cotton's rebound potential. For buyers, this means short-term yarn prices lack strong upward support, but they should also watch for price pulses if autumn/winter orders are released in a concentrated manner and trigger a phase of restocking.
Nanhua Futures' view corroborates this assessment: in the short term, Zhengzhou cotton's upside is capped by continuous reserve releases and high yarn inventories, while the downside is supported by weather risks in the US and India and peak-season shipment expectations — likely to remain range-bound for now.
External Linkage: Substitution Advantage Strengthens, but Upside Drivers Limited
On the external front, a weaker dollar and surging oil prices have pushed up polyester fibre costs, enhancing cotton's substitution demand advantage and supporting ICE cotton's rebound from a three-week low. The most active December cotton futures contract on ICE rose 1.11% on Wednesday, settling at 87.28 cents per pound.
However, the sustainability and strength of the rebound remain to be confirmed. Record Brazilian cotton production expectations continue to ferment, and the USDA supply and demand report is imminent, limiting upward drivers. The market is closely watching the USDA's September estimates for US cotton production and adjustments to the global supply and demand landscape.
Against this internal-external linkage, domestic spinning mills face dual considerations in their raw material procurement strategies: a rebound in external cotton prices could erode the price advantage of imported yarn, but steady domestic reserve releases provide an anchoring effect on cotton costs.