Monthly Cotton Import Decline: China's Inventory Strategy and Global Supply-Demand Dynamics

China imported 110,000 tons of cotton in May 2026, a sharp 35.3% drop from April's 170,000 tons but a staggering 214.7% increase year-on-year, according to the General Administration of Customs. The cumulative Jan-May imports reached 830,000 tons, up 89.9% from the same period last year. This dichotomy reveals an industry actively adjusting its inventory strategy amid rising global prices.

Monthly Decline vs. Annual Surge

The May import volume was the lowest since February 2026, signaling that mills are destocking after aggressive purchases earlier this year. However, the 2025/26 season (Sep 2025-May 2026) cumulative imports of 1.33 million tons, up 44.6% year-on-year, underscore a structural reliance on foreign cotton. The monthly slowdown is not a demand collapse but a tactical pause: mills are waiting for price corrections before re-entering the market.

Downstream Pressure: Spinning Margins and Substitution

International cotton prices have consistently exceeded domestic Chinese cotton, squeezing spinning margins. For example, the profit on 32-count combed cotton yarn has fallen to near break-even levels, forcing some smaller mills to increase the use of polyester and viscose fibers. In major textile clusters like Shandong, Henan, and Jiangsu, mill operating rates remain at 70-80%, but new orders are mostly short-term, leading to cautious raw material purchasing. While Xinjiang cotton offers stable supply, export orders requiring non-Xinjiang origin continue to support import demand.

Supply-Side Outlook: New Crop and Weather Risks

The Northern Hemisphere cotton planting season is underway. The USDA projects a slight increase in global cotton production for 2026/27, but weather risks persist: delayed monsoon in India, drought in Texas, and expanding acreage in Brazil. These factors could trigger price volatility. Chinese importers, having paused in May, may resume buying if international prices dip before the new crop arrives, potentially lifting monthly imports back above 150,000 tons.

Policy and Trade: Quota Allocation and Tariff Risks

Cotton import volumes are heavily influenced by the timing of sliding-duty quota releases. The first batch of 2026 quotas has been distributed, but the second batch remains pending. A concentrated release of quotas in the second half of the year would boost bonded cotton clearance and monthly import data. Conversely, tighter quotas would keep imports subdued. The trajectory of Sino-U.S. trade relations is another wildcard. If tariffs escalate again, Chinese mills may accelerate shifts to Brazilian and Australian cotton, reshaping the import source mix.

Practical Recommendations

For Purchasers - Current international cotton prices are in the mid-to-high historical range; avoid building large inventories at peak prices. Procure based on immediate needs. - Monitor the price spread between Xinjiang and non-Xinjiang cotton, and switch sources flexibly to control costs, especially for orders with specific origin requirements. - Use hedging tools (ZCE cotton futures, ICE cotton futures) to lock in future procurement costs.

For Exporters - For orders targeting markets sensitive to the Uyghur Forced Labor Prevention Act, ensure traceability documentation is in place, prioritizing imported or non-Xinjiang cotton. - Hedge against RMB exchange rate fluctuations that affect actual import costs, using forward contracts where possible. - Negotiate floating basis contracts with upstream suppliers to share price risk.