Cotton Price Scissors: 35% Monthly Import Drop in May Reveals Supply-Demand Dynamics

The sharp contraction in cotton imports in May is sending a clear price signal through the domestic textile supply chain: the game between international cotton prices and domestic demand has entered a new phase.

According to the latest statistics from the General Administration of Customs, China imported approximately 110,000 tons of cotton in May 2026, a month-on-month decrease of about 60,000 tons from April's 170,000 tons, a drop of 35%. However, compared with the same period last year, this figure surged by 214.7%. This scissors-shaped divergence—a sharp month-on-month decline but an explosive year-on-year increase—is by no means a simple seasonal fluctuation but the result of multiple market forces converging.

Three Major Drivers Behind the Import Plunge

International cotton prices have been strengthening since late April, with the ICE cotton futures main contract breaking through 85 cents per pound, nearly 10% higher than the average price in the first quarter. Rising import costs directly dampened traders' willingness to purchase, especially for conventional grades of cotton that are price-sensitive. At the same time, domestic sliding-quota tariffs entered the peak usage period in May, and many enterprises had already consumed their first-half quotas in advance, weakening the impetus for new purchases.

More notably, the raw material inventory strategy of domestic textile mills is undergoing structural changes. After a period of intense stockpiling in the first eight months of the 2025/26 marketing year (cumulative imports of 1.33 million tons, up 44.6% year-on-year), most large-scale mills have restored their cotton inventories to a safe level of 30-45 days. Faced with the current high and volatile cotton price pattern, companies generally adopt a wait-and-see strategy of 'purchase on demand, buy as you use,' rather than continuing to chase high prices for hoarding.

The Base Effect Trap Behind the Year-on-Year Surge

The 214.7% year-on-year increase may seem astonishing, but it must be viewed against the extremely low base in May 2025 (approximately 35,000 tons). At that time, domestic cotton prices were in a downward cycle, coupled with expectations of quota policy adjustments, causing import volumes to hit a temporary low. The current year-on-year surge is more of a 'recovery growth' than an overheating signal from the demand side.

Looking at the cumulative data from January to May, the 830,000 tons imported represents an 89.9% increase over the same period in 2025, but still about 20% below the 1.05 million tons imported during the same period in 2024. This indicates that while total imports are recovering, they have not yet returned to the high levels of two years ago. For spinning mills that rely heavily on imported cotton, this means raw material cost volatility may be higher than in previous years.

Ripple Effects on the Downstream Supply Chain

The sharp monthly fluctuations in cotton imports are transmitting uncertainty to downstream yarn and fabric sectors. The month-on-month decrease of 60,000 tons in May is equivalent to a reduction of about 5% in China's monthly cotton supply. For high-count yarn and compact spinning mills that primarily use imported cotton, sensitivity to raw material costs is even higher.

More critically, the price gap between imported and domestic cotton widened further in May. Xinjiang cotton prices remained relatively stable at inland delivery points due to adjustments in transport subsidy policies. In contrast, the arrival cost of US and Brazilian cotton continued to rise due to exchange rate fluctuations and higher freight costs. This price 'scissors gap' is changing the fiber blending structure of spinning mills, with some companies already increasing the proportion of Xinjiang cotton in their blend to hedge against rising import costs.

Import Outlook and Risk Points for the Second Half

Looking ahead to the second half of 2026, cotton import volumes are likely to follow a 'high in the front, low in the back' trajectory. On one hand, the end of the 2025/26 marketing year (August-September) is typically a period for concentrated quota usage, which could drive a small import peak. On the other hand, the upcoming Northern Hemisphere new crop is expected to ease international supply, potentially leading to a price correction and a subsequent rebound in import volumes.

However, risks to watch include: if the RMB exchange rate continues to depreciate, the arrival cost of imported cotton will remain high; and if China's finished garment exports slow due to trade frictions, mills' purchasing willingness may weaken further.

Practical Recommendations

For Procurement Managers - Monitor the issuance pace of sliding-quota tariffs in July and August, and lock in low-cost supply early to avoid being forced to chase high prices during the peak usage period. - Establish a flexible fiber blending model combining 'imported cotton + Xinjiang cotton,' dynamically adjusting the purchase ratio based on the price gap, and avoid relying on a single variety for more than 60% of needs. - Use futures instruments to hedge imported cotton costs, locking in processing margins, especially for forward orders where raw material costs need to be fixed in advance.

For Foreign Trade Enterprises - Include a 'raw material price fluctuation clause' in export contracts with overseas clients to partially pass on cotton cost changes to finished product pricing. - Monitor the cotton procurement dynamics of Southeast Asian textile mills; if they increase purchasing, it will push up international prices, and vice versa, requiring timely adjustments to quoting strategies. - Use the General Administration of Customs' 'imported cotton arrival data' for trend forecasting; if monthly imports fall below 100,000 tons for two consecutive months, be alert to potential supply tightness and price rebounds in the domestic market.