On June 23, the main Zhengzhou cotton futures contract broke through the critical 16,000 yuan/ton mark, closing at 15,905 yuan/ton, down 105 yuan for the day. This psychological threshold has symbolic significance—the last time the main contract traded below 16,000 was in the fourth quarter of 2023. More worryingly, this decline is not an isolated event but the result of a systemic weakening across domestic and international markets.
Dual Breakdown: Futures and Spot Markets
The fall in Zhengzhou cotton was no accident. On June 23, the entire domestic commodity market weakened, with the cotton sector under particular pressure. From a trading perspective, short positions increased significantly, indicating that capital is actively betting against the market rather than simply triggering stop-losses from long positions. The closing price of 15,905 yuan/ton was a stone's throw from the day's low, suggesting no effective buying support emerged in the final session.
The spot market offered no support either. The domestic cotton 3128B price index stood at 17,631 yuan/ton, down just 1 yuan. While the index appears stable, the gap between the quoted index price and actual transaction prices is widening. Downstream textile mills are seeing order recovery far below expectations, with finished goods inventories piling up. This has led to an extremely conservative procurement strategy—only small, need-based replenishment, with virtually no appetite for bulk purchases. The divergence between a stable index and weak actual trading volumes reveals a market where true liquidity is shrinking.
Concentrated Release of External Bearish Factors, Import Cotton Loses Price Edge
Bearish factors in the international market converged almost simultaneously. The ICE cotton main contract closed at 78.59 cents per pound, down 1.03%. While the decline itself is not dramatic, the underlying drivers are worth examining: US cotton planting is nearly complete, raising expectations of a looser supply in the new season; the US dollar index continues to strengthen, directly lowering valuations of dollar-denominated commodities; and systemic declines in global energy, grain, and financial assets are accelerating capital outflows from the cotton market.
This external weakness quickly transmitted to domestic ports. On June 24, import cotton quotes at major ports all edged lower. The SM grade of the international cotton price index was converted to a delivery price of 14,961 yuan/ton, while the M grade stood at 14,627 yuan/ton. Notably, the M grade fell more than the SM grade, narrowing the domestic-international price spread. However, from the buyer's perspective, this narrowing has not translated into increased attractiveness for import cotton—the reason is simple: domestic downstream demand is too weak to absorb even cheaper imports.
The Logic Loop of Weak Supply and Demand
The current cotton market is caught in a classic "weak supply and weak demand" loop. On the supply side, expectations of a loose new season for US cotton persist, and the macro pressure from a strong dollar shows no sign of abating. On the demand side, the recovery of domestic textile end-consumption is sluggish, with orders consisting mainly of short-term, small-lot deals lacking continuity. Under this dual-weakness framework, the three markets—Zhengzhou futures, spot, and import cotton—are likely to continue their weak, volatile trend.
From an industrial chain perspective, lower cotton prices should theoretically benefit textile mills by reducing raw material costs. But in the current environment, lower costs have not translated into improved profits. High finished goods inventories and weak end-market demand mean textile mills are reluctant to increase purchases even at lower prices. This paradox—"cheaper but no one buys"—is the most direct reflection of a market lacking confidence.
Key Variables to Watch for a Breakout
In the short term, the market lacks effective rebound momentum. Short-side sentiment in Zhengzhou cotton has not fully played out; the spot market lacks buying support; and the price advantage of import cotton has not activated procurement demand. The industry needs to monitor three key variables:
- Weather conditions in US cotton-growing regions, as extreme drought or excessive rainfall could alter new-season production expectations
- The trajectory of the CNY exchange rate, which directly impacts import costs and the domestic-international price spread
- Concrete signs of recovery in domestic textile end-orders, especially export orders for home textiles and apparel
Only when at least one of these variables shows a directional improvement can the cotton market break its current weak pattern. Until then, weak volatility remains the dominant theme.