The domestic-import cotton price spread widened from 1,601 yuan per ton to 2,100 yuan within a single month. That number deserves more attention from textile enterprises than the price decline itself.
A wider spread signals stronger comparative advantage for imported cotton, but out-of-quota import costs remain constrained by total quota limits. The actual arbitrage window is not as wide as the figure suggests.
Spread Structure: Who Is Driving This Downturn
According to China Customs data and industry public data, international cotton prices fell more sharply than domestic ones in September. The ICE cotton futures main contract settled at 78.86 cents per pound at month-end, down 15.3% from late August. The International Cotton M Index, representing the landed average price of imported cotton at Chinese main ports, stood at 92.39 cents per pound, equivalent to an import cost of about 15,215 yuan per ton (1% tariff, excluding port charges), a decline of 8.4%.
Over the same period, the Zhengzhou Commodity Exchange cotton futures main contract settled at 15,840 yuan per ton, down 7.2%. The National Cotton Price B Index, representing the spot market price of standard-grade lint cotton in the interior, was 17,315 yuan per ton, down 4.9%. The international market fell faster while domestic spot prices fell more slowly, naturally widening the spread.
For buyers, a wider spread does not automatically mean switching to imported cotton. Quota limits, bonded inventory levels and arrival schedules determine actual availability. The spread is a signal, not an order.
Supply-Demand Rhythm: Upgraded Output Forecasts and a Lackluster Peak Season
The supply narrative shifted noticeably in September. Earlier concerns about reduced planting area in Xinjiang and high-temperature damage gave way to upward revisions as harvesting progressed. The September growth survey by the National Cotton Market Monitoring System projected China's 2026 cotton output at 7.46 million tons, down 290,000 tons year-on-year but still a historically high-yield year.
Harvesting is also earlier than usual. Xinjiang machine-picked cotton began arriving about a week ahead of last year, with opening prices concentrated at 7.0-7.3 yuan per kilogram, slightly above the ten-year average of 6.9 yuan. This translates to a ginning cost of 16,000-17,000 yuan per ton for new lint, at the upper end of the normal range. Ginning mills have become notably more cautious, with some large enterprises scaling back purchasing and processing, while most consider hedging in the futures market while buying to avoid holding unilateral spot positions.
Demand has not kept pace with supply. From January to August, national yarn output reached 14.339 million tons, up only 0.7% year-on-year. Xinjiang yarn output was 2.570 million tons, up 17.8%, as capacity continued to be released. Domestic textile and apparel sales totaled 961.49 billion yuan, up 5.1%, while exports reached 203.31 billion US dollars, up 3.1%.
In September, autumn-winter and holiday orders brought seasonal warming, with spinning and weaving mills restocking, but orders did not surge significantly. In early September, mill operating rates and yarn sales ratios were 81.9% and 96.7% respectively. Although both rose for a second consecutive month, they were down 1.5 and 0.5 percentage points from a year earlier, and down 4.9 and 3.4 percentage points from first-half averages. The peak season is warming, but its quality falls short of expectations.
Macro Variables: Structural Positives and Periodic Disturbances
At the macro level, bullish and bearish factors coexist. On the bearish side, US inflation remains elevated, and expectations for another Federal Reserve rate hike this year are rising. Rising long-term US Treasury yields have tightened global liquidity and strengthened the dollar, pressuring international cotton prices.
On the bullish side, the late-September Washington summit between Chinese and US leaders produced an eight-point consensus, stabilizing bilateral relations in the short term. For the cotton textile market, tariff relief has been extended to January next year, benefiting the autumn-winter export environment. China's tariff reduction list includes US cotton, which will lower import costs and enhance competitiveness, though actual incremental volume remains to be seen given quota limits and high bonded inventory. The US tariff reduction list covers only some non-cotton home textiles, not cotton textile and apparel products, so the benefit is less than expected.
Overall, positive factors for the cotton textile market are structural, and actual incremental volume awaits verification. Future attention should focus on complete tariff reduction details and implementation timing.
In summary, with new domestic cotton about to arrive in large volumes, supply pressure will increase. Downstream demand is recovering seasonally but lacks strength. Domestic cotton prices are likely to fluctuate weakly around new cotton costs, with limited downside. International cotton prices are expected to remain range-bound amid Federal Reserve rate hike expectations and Middle East instability.