The 16,500 yuan per tonne level has become a psychological line that bulls and bears are fighting over repeatedly. Zhengzhou cotton futures fell 190 yuan per tonne in a single session, a drop of 1.14%, pulling the contract's centre of gravity lower. But this is not a signal of a trend reversal. It is a textbook tug-of-war in a market lacking a single dominant driver. For the textile supply chain, what matters is not the daily fluctuation but how the tension between expectations of rising supply and weak demand will reshape purchasing rhythms before the new crop arrives.
Supply Side: Three Sources of Pressure
Less than a month remains before concentrated harvesting begins in Xinjiang. Defoliants are being sprayed across cotton-growing areas, and expectations of new-crop supply increments are intensifying. At the same time, cotton imports have increased, and state reserve auctions continue to release spot resources into the market. The combination of these three sources has clearly loosened the domestic supply environment.
The significance of reserve auctions lies not only in filling spot gaps but also in exerting sustained pressure on futures. Although domestic cotton inventories remain at low-to-medium levels, providing some support, the expectation of supply increments continues to cap upside potential. This means that even if a rebound occurs, the room above is relatively limited.
For ginners and traders, this supply pattern implies that hedging demand could be released in a concentrated manner after new-crop pricing. Once futures prices climb persistently, hedging sell orders from farmers, traders and processors may enter the market intensively, further suppressing prices. Supply-side pressure is not linear; it can suddenly amplify within specific price ranges.
Demand Side: Export Growth Slows, Mills Under Pressure
Demand presents a mixed picture. In August, China's textile and apparel exports maintained year-on-year growth, with apparel performing relatively well, indicating that overseas consumption fundamentals remain. However, month-on-month export data has already declined. Overseas end customers are restocking slowly, with no large-scale concentrated replenishment observed.
The domestic downstream textile industry is equally challenged. Although the traditional peak season has arrived, order increments for textile enterprises remain limited, and many spinning mills are still operating at a loss. Faced with elevated cotton raw material prices, enterprises are reluctant to stockpile actively, mostly maintaining just-in-time purchasing. The recovery in downstream operating rates has fallen short of earlier market expectations, and the strength of demand recovery still requires further confirmation from order data.
From a supply chain transmission perspective, the contradiction between high cotton costs and poor price transmission to yarn and grey fabric is squeezing margins in the midstream. For buyers, this means yarn prices are unlikely to decline significantly in the short term, but upside is also constrained by end-market acceptance.
The Oscillation Logic and Medium-Term Variables
Currently, the bull and bear narratives are clear. On the bullish side, domestic cotton inventories are at low-to-medium levels, and the traditional autumn-winter peak season expectation provides bottom support, with a strong technical support zone forming around 16,500 yuan per tonne. On the bearish side, continuous state reserve auctions are increasing market supply, downstream textile enterprises are losing money and cannot bear sustained high cotton costs, and cotton prices themselves have an intrinsic need for correction.
With bulls and bears offsetting each other, the market lacks a sufficiently strong driver to push prices out of a single-direction trend. Short-term wide-range oscillation is the most likely scenario. In the medium term, however, as concentrated new-crop harvesting approaches, the market's trading focus will gradually shift to new-crop opening prices and seed cotton procurement costs. These two variables will determine whether cotton prices break downward or stabilise and recover.
For textile enterprises, the core strategy at this stage is not to bet on direction but to manage raw material inventory rhythms well. In an oscillating market, the risk of chasing rallies and selling declines far exceeds the opportunities.