The price gap between imported cotton and inland Xinjiang cotton is being repriced on a weekly basis. China Customs and industry public data show that in mid-September, Brazilian cotton under the 1% tariff was 3,400-3,700 yuan per tonne cheaper than Xinjiang cotton quoted from inland warehouses. That advantage has narrowed by 400-700 yuan per tonne since early September. For spinning mills, this is not a simple fluctuation but a signal that the procurement window is closing.
The Transmission Chain Behind the Narrowing Spread
On the quotation side, bonded 2025 Brazilian cotton M 1-5/32 (strength 28/29GPT) at Qingdao Port was quoted at 87-88 cents/lb net weight, putting import cost at about 14,530-14,690 yuan per tonne under the 1% tariff, rising to 14,980-15,095 yuan under the sliding duty. 2026 Australian cotton SM 1-5/32 at Zhangjiagang and Nantong was cut to around 98.5 cents/lb. Meanwhile, Xinjiang machine-picked cotton 3129B/3130B from inland warehouses in Henan, Shandong and Jiangsu was quoted at 17,850-18,050 yuan per tonne on a gross weight basis.
The net weight versus gross weight settlement difference is the most overlooked variable in spread calculations. After conversion, Brazilian cotton still holds a cost edge, but the margin has shrunk noticeably. This means small and medium mills that relied on imported cotton for cost reduction will see diminishing marginal returns if they have not locked in forward shipments.
Three Pressures Keeping Bonded Stocks Rising
The difficulty in drawing down bonded cotton stocks stems from three demand-side pressures. First, tight quota supply directly limits the absorption of bonded cotton, while higher costs under the sliding duty further weaken buying interest. Second, yuan depreciation raises the real import cost and squeezes traders' room for concessions. Third, slower-than-expected export traceability orders reduce rigid demand for high-grade foreign cotton.
Continuous reserve cotton sales create a substitution effect on the domestic supply side. Stable Xinjiang cotton quotes from inland warehouses, combined with reserve auctions, are reducing textile mills' reliance on imported cotton in their blending plans. A medium-sized trader in Qingdao reported that cleared 2025 Brazilian cotton M 1-5/32 carries a RMB basis of 1,550-1,750 yuan per tonne. With rising Australian arrivals and more Brazilian shipment listings for September, October and November, selling pressure keeps mounting.
At the industrial belt level, trading hubs such as Qingdao, Zhangjiagang and Wuhan have shifted from holding basis firm to accelerating shipments. Range-bound foreign futures and four consecutive declines in Zhengzhou cotton futures reinforce each other, strengthening traders' willingness to cut basis. Yet mills remain restrained in quotes, suggesting a consensus bearish view on upcoming arrivals.
Practical Impact on Procurement and Blending
For spinning mills, the narrowing spread directly changes blending economics. When the 1% tariff spread falls below 3,500 yuan per tonne, the cost-performance of switching to domestic cotton becomes apparent for certain low and medium count yarns. For export-oriented firms, slower traceability orders mean weaker rigid demand for foreign cotton, and procurement rhythm should shift from grabbing quotas to controlling inventory.
For traders, rising Australian arrivals and concentrated Brazilian shipment listings mean basis downside pressure has not fully released. If the yuan exchange rate and quota policy show no clear turn, the destocking cycle for bonded cotton may lengthen, and capital occupation cost will become the main erosion of trader profits.