The spot cotton market is experiencing a clear price correction. On June 26, 2026, the average price of 3128B grade cotton across major domestic markets fell to around 17,300 yuan/ton, with the Xinjiang origin price hitting a low of 17,280 yuan/ton, down more than 300 yuan from earlier peaks. Consumer regions like Fujian and Zhejiang reported 17,520 and 17,508 yuan/ton respectively, slipping about 200 yuan week-on-week. The core driver of this decline is a shift in supply expectations. Currently in the critical growth period for northern hemisphere cotton, Xinjiang’s main producing areas have seen generally favorable weather, boosting optimism for the new crop. Meanwhile, faster issuance of import cotton quotas and rising port bonded inventories are further capping spot prices. The price spread between origin and consumer regions remains within a reasonable 200-250 yuan/ton range, indicating normal logistics cost transmission and no regional supply-demand imbalance.
Industrial Logic Behind the Price Decline
Price drops do not necessarily signal market panic; instead, they may be creating a new equilibrium for upstream and downstream players. For cotton textile mills, raw material costs account for over 60% of total production costs. The current price level means a reduction of about 250-300 yuan per ton of yarn compared to last month, a non-negligible benefit for mills operating on thin margins. However, downstream weaving and garment orders show no clear recovery signs, keeping mills cautious in procurement with a hand-to-mouth strategy. Regionally, Xinjiang, as the largest domestic cotton producer, serves as a bellwether. The 17,280 yuan/ton price is already below the cost line for some ginners, squeezing processing margins. If prices fall further, some small and medium ginners may suspend purchases or reduce operating rates, creating a self-correcting supply adjustment.
Import vs. Domestic Cotton Price Parity
International cotton prices are also trending down, with ICE futures below 75 cents/lb. Under a 1% tariff, imported cotton landed costs are around 16,200-16,400 yuan/ton, widening the spread with domestic cotton to over 1,000 yuan/ton. This makes imports highly cost-competitive, prompting large mills with quotas to shift procurement focus to port stocks. However, import quotas are limited, and sliding-duty imported costs remain higher than those under 1% tariff quotas, so domestic cotton still dominates in meeting domestic rigid demand. In the short term, increased imports will intensify domestic competition, but domestic cotton’s quality and supply stability remain irreplaceable for downstream users.
Market Sentiment and Procurement Timing
Historically, late June to early July marks the start of autumn-winter order preparation. Current prices have fallen to three-month lows, leading some market participants to view this as a potential procurement window. However, caution is warranted: Xinjiang’s cotton enters the boll-setting stage in July-August, and extreme weather like heatwaves or hail could quickly reverse production expectations, triggering price rebounds. Additionally, the national reserve cotton auction policy bears watching. If the auction price exceeds current spot levels, it will provide a floor; otherwise, it could further dampen sentiment. Overall, the market is in a tug-of-war between bearish and bullish forces, with limited room for further declines but requiring new demand drivers for a rebound.