China's total cotton imports fell more than 10% month-on-month in August, yet US cotton imports surged 1,195.61% year-on-year, with their share rebounding to 8.65% and overtaking Brazilian cotton. This divergence does not signal an expansion in overall demand, but rather proactive restocking by textile mills during a period of supply structure transition.
Four Drivers Behind the Import Structure Shift
The positive signals from the sixth round of Sino-US economic and trade consultations, combined with stronger expectations for Christmas orders from Europe and America, form the primary external condition for the recovery in US cotton demand. US Customs grants tariff reductions on cotton products using a certain proportion of US cotton, directly lowering raw material costs for export-oriented mills and providing substantive support.
The RMB exchange rate trend constitutes the second driver. In August, the central parity of the RMB against the USD appreciated by a cumulative 66 basis points, with the onshore rate rising about 0.4%. The appreciation pace accelerated in September, slightly reducing the landed cost of imported US cotton. For mills, the exchange rate window and the narrowing spread between domestic and international cotton prices created a resonance, temporarily improving US cotton's cost-effectiveness.
The gap in Brazilian cotton supply is the third factor. Since July, sales of the 2024/25 Brazilian crop have neared their end, and the quality indicators of mid-to-low grade resources have become less compatible with Chinese mills' requirements. Market inquiries and contracts have shifted toward September-November shipment new crop 2025/26 Brazilian cotton. This temporary shortage of premium Brazilian cotton created space for US cotton substitution.
The fourth factor stems from concerns over the quality of the new US crop. From July to September, high temperatures and drought persisted across most major US cotton-growing regions. Mills and importers have growing concerns about the grade and quality of the 2026/27 US crop, particularly for MOT/EMOT resources from the Southwest region sold and shipped earlier. Restocking 2025/26 US cotton with slightly better quality at lower prices has become a defensive move for some enterprises.
Industrial Belt Response and Cost Transmission
From the perspective of industrial belt response, mills in traditional cotton-consuming provinces such as Shandong, Jiangsu, and Henan have shown notably increased inquiry activity for US cotton. However, it should be noted that the 8.65% share remains historically low, and the absolute volume of US cotton imports at just 6,960 tonnes is insufficient to alter the fundamental pattern of China's cotton imports being dominated by Brazilian and Australian cotton.
For downstream yarn enterprises, the direct impact of US cotton restocking is reflected in blending costs. The premium on US cotton quality offsets tariff reductions, limiting the actual change in cotton costs, but adjustments to blending structures require time to verify yarn quality. Blended yarn producers are more concerned that if quality concerns for the 2026/27 US crop materialize, the supply gap in high-grade cotton could push up raw material costs for combed yarn.
From a price expectation perspective, the RMB appreciation window overlapping with weather premiums in US cotton regions may continue to narrow the spread between domestic and international cotton prices in the short term. However, after new Brazilian cotton reaches the market, supply-side competition will re-suppress the premium space for US cotton. The restocking pace of mills is essentially a trade-off between quality certainty and price elasticity.
Practical Implications for Procurement and Trade
The rebound in US cotton imports is not a trend reversal but a structural opportunity during a supply transition period. For procurement teams, the core task in the current window is to lock in 2025/26 resources with confirmed quality rather than chase price rallies. For trading firms, the conditions for using tariff reduction policies need to be verified order by order to avoid losing preferential eligibility due to non-compliant origin proportions.