The seasonal slowdown and cost pressures have significantly dampened China's cotton import pace in May. Customs data shows imports plunged 31.7% month-on-month to 110,000 tons, though still surged 2.3 times year-on-year, supported by a low base and additional sliding-duty quotas. Cumulative imports for the first five months reached 830,000 tons, up 90.7% YoY.
Brazil Dominates, US Cotton Rebounds on Order Rush
Brazilian cotton maintained a commanding 58% share, while US cotton's share jumped 7 percentage points to 22%, driven by concentrated production of apparel orders for the US market. Australian cotton saw its share decline due to tight spot supply. Kazakhstan and Afghanistan accounted for 5% and 4%, respectively.
In terms of trade modes, imports under bonded supervision premises remained the highest at 45%, while those under special customs supervision zones rose to 43%. General trade plunged to 7%, indicating mills are adopting more flexible procurement strategies to navigate uncertain orders.
Import Prices Rise, Squeezing Mill Margins
Average import prices rose 2.6% MoM to $1,699/ton, with Brazilian cotton at $1,615/ton, US cotton at $1,856/ton, and Australian cotton at $1,948/ton. The narrowing of domestic-international price spreads, coupled with weak downstream demand, prompted mills to slow purchases and rely on domestic inventories.
Export Divergence: Apparel Recovers, Fabrics Cool
May textile and apparel exports reached $25.61 billion, up 6.5% MoM but down 2.3% YoY. Apparel exports surged 14.7% MoM on summer order shipments, while textile exports edged down 0.9% MoM as overseas fabric restocking paused. Cumulative exports for Jan-May were roughly flat YoY at $116.74 billion.
Global Supply Tightens: USDA Cuts Stocks, Australia Output Drops 16%
The USDA June report lowered global ending stocks by over 131,000 tons, with the stocks-to-use ratio falling to 64%. Australia's cotton output is forecast to drop 16% to 1 million tons due to irrigation water shortages and low rainfall, though still 20% above the 10-year average.
Recommendations
#### For Buyers
- Prioritize Brazilian cotton for its cost advantage during the off-season.
- Avoid chasing premiums on US and Australian cotton amid supply concerns.
- Leverage bonded trade modes to flexibly manage inventory.
#### For Exporters
- Accelerate summer apparel shipments to capture the window of demand.
- Diversify into functional or eco-friendly fabrics to counter cooling textile orders.
- Negotiate price terms with clients early, given potential cost hikes from Australian cotton.