China's cotton import market is undergoing a structural realignment. According to customs data for May 2026, total imports stood at 110,000 tons, a sharp 31.7% drop month-on-month but a staggering 2.3-fold increase year-on-year. This divergence reflects the tug-of-war between seasonal demand contraction and the effects of policy-driven quotas and a low base from the previous year.
Import Structure Reshaped: Brazil Dominates, US Cotton Rebounds
By origin, Brazilian cotton maintained its top position, with its share rising to 58% in May, up from the previous month. This dominance is underpinned by Brazilian cotton's consistent price advantage—its average price stood at $1,615/ton, well below the $1,856/ton for US cotton and $1,948/ton for Australian cotton.
US cotton's performance was more dramatic. Its share jumped 7 percentage points month-on-month to 22%, a notable rebound. This surge was not driven by improved competitiveness but by a concentrated rush of orders from Chinese apparel manufacturers exporting to the US. Amid ongoing trade frictions, many orders are being expedited, directly boosting demand for US cotton. This short-term volatility should not be mistaken for a long-term recovery in market share.
Australian cotton's decline was more passive. The June report from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) showed that the 2025/26 season output is expected to be only 1 million tons, down 16% year-on-year. Water shortages and below-average rainfall in key growing regions have reduced both planting area and yields. Although output is still 20% above the 10-year average, insufficient spot supply has already impacted import data.
Price Transmission and Procurement: Rational Behavior in a Slow Season
The average import price in May rose 2.6% month-on-month to $1,699/ton, driven by persistent drought in major overseas producing regions. Prices for US and Australian cotton rose sharply, up 7.6% and 8.3% month-on-month, respectively. As prices climbed and the textile industry entered its traditional slow season, mills slowed their import purchases. With insufficient new orders, factories relied more on domestic inventories, explaining the sharp decline in import volumes.
Notably, the share of goods entering bonded supervision sites remained high at 45%, while goods in special customs supervision zones accounted for 43%. General trade fell to just 7%. This structure indicates that imported cotton is still primarily used for bonded warehousing and processing, allowing mills to flexibly manage inventory in response to order fluctuations.
Global Rebalancing: Supply Cuts and Inventory Pressure
The USDA's June global cotton supply and demand report sent subtle signals: global production for 2025/26 was revised up only slightly by 3,300 tons, while consumption was trimmed by 5,400 tons. However, exports were raised by over 1%, and ending stocks were slashed by 131,000 tons, bringing the stock-to-use ratio down to 64%. This suggests that the global market is shifting from a surplus to a tighter balance.
Australia's production cut is one of the biggest supply-side variables. Although irrigated areas have partially mitigated the drought impact, a 16% output drop will pressure the global supply of high-grade cotton. For Chinese textile mills, this means procurement costs for premium cotton are likely to rise further.