A 99.90% auction rate does not signal a cotton market recovery. On the contrary, it shows spinning mills are trading extremely low inventories for bargaining power. From September 20 to 24, the tenth week of China's reserve cotton auction, 40,425.5525 tons were listed and 40,385.5455 tons were sold, with an average price of 16,607.55 yuan/ton, equivalent to 17,384.25 yuan/ton for the standard grade (3128). The average premium was 791.25 yuan/ton. The highest transaction price reached 17,460 yuan/ton while the lowest was 16,010 yuan/ton, a spread of 1,450 yuan/ton, reflecting heightened sensitivity to quality and price among bidders.
Auction Structure: Price Center Shifts Lower Despite High Transaction Rate
The weekly average price fell 208.46 yuan/ton from the previous week, a decline of about 1.24%. That drop is not dramatic in isolation, but combined with the 99.90% transaction rate, it indicates the market is not driven by strong demand. Instead, supply-side pricing is tilting toward buyers. Nearly all listed resources were cleared, meaning the reserve floor price is aligned with the current spot market. Mills are willing to take goods but unwilling to chase prices higher.
Cumulatively, from July 20 to September 24, China Reserve Cotton Management Co. listed 401,691.7451 tons and sold 398,584.7791 tons, a transaction rate of 99.23%. The average price was 17,186.00 yuan/ton, equivalent to 17,845.04 yuan/ton for the standard grade, with an average premium of 1,147.35 yuan/ton. The highest price was 19,370 yuan/ton and the lowest 16,010 yuan/ton. The cumulative average is about 578 yuan/ton higher than this week's average, indicating that prices were higher in the earlier phase of the auction and the price center has clearly shifted downward recently.
By category, Xinjiang cotton recorded a cumulative average price of 16,997.17 yuan/ton, equivalent to 17,628.62 yuan/ton for the standard grade, with an average premium of 1,145.45 yuan/ton. Imported cotton averaged 17,231.17 yuan/ton, equivalent to 17,896.80 yuan/ton, with an average premium of 1,147.80 yuan/ton. Imported cotton carries a premium of about 234 yuan/ton over Xinjiang cotton, or about 268 yuan/ton on a standard-grade basis. This spread has direct reference value for buyers: if orders do not demand high consistency, Xinjiang cotton offers better value; if downstream processes require strict fiber length and micronaire, the imported cotton premium remains acceptable.
Industrial Transmission: Futures Stabilization vs. Low-Inventory Strategy
Influenced by improved macroeconomic sentiment, Zhengzhou cotton futures and US cotton futures have both stabilized at low levels. However, futures stabilization has not translated into spot price chasing. The reason lies in a fundamental shift in downstream procurement logic. Spinning mills are broadly adopting demand-based purchasing and low-inventory turnover, avoiding stockpiling and speculation, producing to order. This means that even if futures rebound, spot transaction prices will struggle to follow, because mill restocking demand is fragmented and short-term.
Looking at industrial belt reactions, operating rates in major cotton textile clusters in Jiangsu, Shandong and Henan remain stable, but finished goods inventory depletion is slow. Price competition in grey fabric and yarn remains intense, making it difficult for mills to pass higher raw material costs downstream. This creates a closed loop: the raw material price center shifts lower, slightly repairing mill margins, but weak end demand limits yarn price increases. Ultimately, mills can only maintain low-inventory strategies, which in turn caps the upside for cotton prices.
In the short term, cotton prices are likely to continue fluctuating at low levels. Reserve cotton resources continue to be supplied, and expectations of new crop arrivals add to supply-side pressure. Demand depends on the actual landing of autumn and winter orders and whether export orders see a seasonal rebound in the fourth quarter.
Practical Implications for Buyers and Mills
For buyers, current cotton prices are relatively low, but this does not mean large-scale bottom-fishing is warranted. Reserve cotton auctions offer transparent pricing and controllable quality, making them suitable as a short-term raw material supplement channel. For mills, low-inventory strategies are rational during a price downtrend, but vigilance is needed regarding potential quality fluctuations and price competition after new cotton arrives.