The 16,500 yuan per tonne level was supposed to be a buffer built jointly by reserve cotton sales and peak-season expectations. In early September, the Zhengzhou cotton 2701 contract broke below it anyway, falling 1.14% to a one-month low. The issue is not whether supply is sufficient, but that the market has already priced in "sufficient" — any marginal easing gets magnified into bearish sentiment.
Supply: Reserve sales cushion, new crop weighs
We are in the gap between depleted old-crop stocks and the large-scale arrival of new cotton. Reserve cotton is being offered at a steady pace of about 8,000 tonnes a day. On 9 September, 8,006.759 tonnes were listed and fully sold, a 100% clearance rate, at an average price of 17,388 yuan per tonne, with the 3128-equivalent price at 18,091 yuan, up 48 yuan and 151 yuan respectively from the previous day. Two things stand out: downstream demand for immediately spinnable resources remains rigid, and bidding sentiment has shifted from panic buying to rationality, with mark-ups narrowing.
The real pressure comes from Xinjiang. The boll-opening rate has passed 30%, and the listing window is approaching, turning hedging pressure from expectation into reality. For ginners, cooling buying enthusiasm means pricing power shifts further to buyers. For spinning mills, raw material inventory strategy needs to be more precise in this pre-listing period; blind restocking risks stepping into a downward price rhythm.
Demand: Peak season underwhelms, orders lag operating rates
Fabric mill operating rates have indeed recovered and finished goods inventories are being drawn down, but end-user orders have not yet concentrated. This is the core contradiction: production-side recovery has not translated into procurement-side volume. Mills are buying mainly on demand, and wait-and-see sentiment is rising.
Why does a higher operating rate fail to lift cotton consumption? Because this round of restarts is driven more by autumn-winter replenishment and short orders than by long-cycle large orders. For buyers, this means yarn prices lack sustained upward support. For traders, the risk-reward of stockpiling for the peak season is deteriorating. The traditional "Golden September, Silver October" narrative needs a discount this year.
Export market: Substitution demand supports, but upside limited
A weaker dollar combined with firmer oil has raised polyester fiber costs, enhancing cotton's cost-effectiveness in substitution demand, supporting ICE cotton's rebound from a three-week low. The most active December contract rose 1.11% to settle at 87.28 cents per pound.
But the sustainability of the rebound is questionable. Expectations of record Brazilian output continue to ferment, and the USDA's September supply and demand report is imminent, limiting upside drivers. For domestic spinners, changes in the internal-external cotton price spread will directly affect the competitiveness of imported yarn and cotton, and in turn affect fourth-quarter fiber blending structure. If the USDA raises global production estimates, the export rebound could quickly fizzle, and Zhengzhou's trading range would shift lower accordingly.
Outlook: Three observation points under a range-bound market
Nanhua Futures' view is representative: the upside is capped by continuous reserve sales and high cotton yarn inventories, while the downside is supported by US and Indian weather risks and peak-season shipment expectations, suggesting short-term range trading. For the industry, rather than guessing direction, watch the rhythm.
- The actual pace of autumn-winter order releases is the most direct demand-side verification signal;
- Changes in reserve cotton listing volumes and clearance rates reflect the policy side's tolerance range for prices;
- The USDA's September supply and demand forecast adjustment determines whether the export market can provide positive linkage to the domestic market.