A short-term emotional resonance between a weaker dollar and rebounding oil prices helped ICE cotton futures halt their losing streak on June 25. The most-active December contract closed at 76.97 cents per pound, up 0.93%, after touching a two-week low of 76.09 cents earlier in the session. For the textile supply chain, this bounce is more of a technical correction than a fundamental improvement.
Transient Support from Dollar and Oil
The U.S. dollar index retreated after three consecutive days of gains, directly lowering the cost of dollar-denominated cotton for overseas buyers. Meanwhile, crude oil surged over 2% on the day, driven by renewed supply fears after a cargo ship was attacked near Oman. The logic linking oil to cotton is straightforward: polyester fiber, a substitute for cotton, is derived from crude oil, so higher oil prices improve cotton's relative competitiveness.
However, both catalysts are inherently short-lived. The dollar's weakness reflects a momentary repricing of Fed rate hike expectations, while geopolitical oil shocks rarely sustain. Once the sentiment fades, cotton prices will again face the test of real demand.
Export Data Exposes Demand Weakness
The more worrying signal for the industry came from the USDA's weekly export sales report. For the week ending June 18, current-year U.S. upland cotton net sales were only 83,864 bales, down 53% from the previous week and 61% below the prior four-week average. Next-year sales added 67,089 bales, bringing the combined total to 150,953 bales. Shipments rose 20% week-on-week to 300,155 bales, but shipments to China stood at just 12,248 bales, a low share.
This indicates that major overseas buyers, especially China as the world's largest cotton importer, are not actively purchasing despite relatively low prices. The reluctance to bargain-hunt suggests that destocking pressure in the end-user apparel market is still being transmitted upstream. Spinners and traders prefer to wait on the sidelines rather than build inventory.
Ripple Effects on Industrial Clusters
For domestic textile clusters such as Keqiao and Nantong, weak U.S. cotton export data directly impacts import cotton price expectations. These home textile and fabric hubs typically benchmark their raw material procurement against international futures. If the ICE cotton rebound lacks volume support, it is unlikely to form a sustained uptrend, and imported cotton spot prices will likely remain weak.
The Cotlook A index fell 250 points to 85.05 cents per pound, a notable decline from previous highs, offering domestic mills a temporary reprieve on raw material costs. But the pressure has merely shifted from the input side to the output side—the recovery of downstream orders remains the decisive factor for the industry to truly turn around.