China's cotton imports hit the brakes in May after a strong first quarter. Customs data shows imports of 110,000 tons, down 31.7% month-on-month, but still up 2.3 times year-on-year. The divergence reflects the dual pressure of rising international cotton prices and weak domestic off-season demand.
Import structure diverges sharply: Brazil dominates, US recovers, Australia absent
Brazil consolidated its position as the top supplier, accounting for 58% of May imports, nearly six-tenths of the total. Its average price of $1,615 per ton was $241 lower than US cotton, maintaining a significant cost advantage. US cotton's share jumped 7 percentage points to 22%, driven by concentrated rush orders for apparel exports to the US. Australian cotton saw its share decline sharply due to tight spot supply from drought-affected eastern growing regions, with the gap filled by Brazilian and US supplies.
Notably, in trade modes, bonded warehouse entries remained high at 45%, while goods in special customs supervision zones rose to 43%, and general trade plunged to 7%. This suggests most imported cotton is held as bonded inventory, with mills reluctant to clear directly—further confirming cautious end-demand sentiment.
Price transmission mechanism falters: rising import costs squeeze margins, mills destock
Average import prices rose 2.6% month-on-month to $1,699 per ton, with US and Australian cotton surging 7.6% and 8.3% respectively. Higher international prices eroded the cost advantage over domestic cotton, and as the textile market entered its traditional off-season with insufficient new orders, mills preferred to consume existing domestic inventories rather than accelerate foreign purchases. This 'price up, purchases down' pattern reflects rational contraction under compressed downstream margins.
For textile mills, the contradiction between rising raw material costs and limited ability to raise finished product prices is intensifying. Small and medium-sized enterprises, lacking scale procurement advantages and bargaining power, can only respond by reducing operating rates or cutting raw material reserves. Industry data shows domestic yarn operating rates fell about 3 percentage points month-on-month in May, confirming the slowdown.
Export side shows mixed signals: apparel orders concentrated delivery, fabric restocking nearly complete
In contrast to shrinking imports, textile and apparel exports grew 6.5% month-on-month to $25.61 billion in May, mainly driven by concentrated delivery of overseas summer clothing orders. Apparel exports surged 14.7% month-on-month, while textile exports edged down 0.9%. This signals that overseas brands are still restocking finished garments, but intermediate fabric procurement is largely finished. Given that apparel exports still fell 4.1% year-on-year, the current growth is more seasonal order release than a fundamental demand recovery.
Cumulative exports from January to May stood at $116.74 billion, roughly flat year-on-year, indicating no substantive breakthrough in total export volume. For fabric suppliers, the sustainability of second-half orders will depend on overseas destocking progress and the timing of new procurement cycles.
Global supply tightening expectations: Australia down 16%, stocks-to-use ratio falls to 64%
Supply-side uncertainties are mounting. The USDA June supply-demand report cut 2025/26 global ending stocks by over 131,000 tons, pushing the stocks-to-use ratio down to 64%. ABARES' latest report further lowered Australia's production estimate to 1 million tons, down 16% year-on-year, due to irrigation water shortages and below-average rainfall in eastern growing regions. Although irrigated support keeps output 20% above the 10-year average, the downtrend is clear.
Whether Brazil and the US can fully compensate for Australia's shortfall remains uncertain. Drought persisted in US cotton regions in May; if weather conditions don't improve, new-crop US production may face downside risks. The global cotton supply-demand balance is shifting from loose to tight, and import prices may remain elevated.