A warning signal is emerging from China's reserve cotton auctions: when the sell-through rate consistently approaches full capacity, the market's price discovery function shifts from competitive bidding to a scramble for supply. On September 24, China Reserve Cotton Management Co. listed 8,005.6110 tonnes of reserve cotton for sale, all of which was sold, achieving a 100% clearance rate. The average transaction price was 16,662.82 yuan per tonne, up 13.85 yuan from the previous trading day, equivalent to 17,448.82 yuan for the 3128B grade. The highest price reached 17,420 yuan per tonne, while the lowest was 16,420 yuan per tonne.
Background
This is not an isolated occurrence. As of September 24, cumulative listed reserve cotton reached 401,691.7451 tonnes, with 398,584.7791 tonnes sold, yielding a cumulative clearance rate of 99.23%. The cumulative average price stood at 17,186.00 yuan per tonne, equivalent to 17,845.04 yuan for the 3128B grade. The cumulative highest price was 19,370 yuan per tonne, and the lowest was 16,010 yuan per tonne.
Breaking down by origin, imported cotton averaged 17,231.17 yuan per tonne, equivalent to 17,896.80 yuan for 3128B, while Xinjiang cotton averaged 16,997.17 yuan per tonne, equivalent to 17,628.62 yuan for 3128B. The spread between imported and Xinjiang cotton stands at approximately 234 yuan per tonne, indicating that market preference for higher-quality imported fibre remains intact.
Why has the clearance rate been able to stay above 99% for an extended period? The core reason lies in the pricing mechanism of reserve cotton, which provides a reference ceiling for the market. When spot market quotations exceed the reserve cotton's 3128B equivalent price, textile enterprises naturally gravitate toward the reserve channel. This means the average reserve cotton transaction price effectively becomes an upper anchor for spot cotton prices.
Industry Impact
For upstream ginners and traders, the persistently high clearance rate sends a clear signal: at current price levels, market absorption capacity is sufficient. However, it is worth noting that a 100% clearance rate may also indicate that some demand has been pulled forward. Enterprises may be accelerating purchases out of concern that future resources will diminish, rather than purely driven by immediate production needs.
For midstream yarn spinners, with cotton costs anchored in the 16,600-17,200 yuan per tonne range, the floor support for yarn quotations appears relatively clear. The problem, however, is whether downstream grey fabric and garment segments can accept the corresponding cost pass-through. If end-order prices cannot move up in tandem, spinning margins will be further squeezed.
For downstream exporters, cotton prices stabilising in the 3128B equivalent range of approximately 17,400-17,800 yuan per tonne is conducive to locking in costs when taking orders. But attention must be paid to the pace of reserve cotton releases and potential policy adjustments that could shift this price centre. Once the reserve cotton rotation nears its end, pricing power in the spot market will return to commercial inventory dynamics, and price volatility may amplify.
From the perspective of regional industrial belts, Xinjiang cotton's average transaction price of 16,997.17 yuan per tonne is lower than imported cotton's 17,231.17 yuan per tonne, a spread of about 234 yuan per tonne. For spinners relying primarily on Xinjiang cotton, this spread means raw material costs are relatively controllable. However, transportation cycles and warehousing costs for Xinjiang cotton must be factored in, and the actual delivered price gap may narrow.