On June 23, China's commodity markets collectively weakened, with the main Zhengzhou cotton contract breaking below the key psychological threshold of 16,000 yuan/ton, closing at 15,905 yuan/ton, down 105 yuan from the previous settlement. This breach not only signals rising bearish sentiment in the market but also reflects the deep-seated contradictions of a supply-demand weak structure.
Notably, the spot market remained weak. The domestic 3128B cotton price index stood at 17,631 yuan/ton, down only 1 yuan, but this masks a real picture of sluggish downstream textile orders and high finished product inventories. Procurement is limited to small, need-based replenishment, with little willingness for bulk purchasing, offering no effective price support.
International Bearish Factors Converge, Transmission Effect Clear
International bearish factors converged, putting pressure on ICE cotton. On June 23, the main ICE cotton contract closed at 78.59 cents/lb, down 1.03% in a single day. Three pressures are at play: US cotton planting is nearly complete, raising expectations for new crop production; a stronger US dollar depresses dollar-denominated commodity valuations; and a broad decline in energy, grains, and financial assets has led to capital outflows from cotton.
This decline directly transmitted to China's import cotton market. On June 24, import cotton quotes at major ports fell slightly. Based on a 1% tariff and the Bank of China mid-rate, the international cotton price index for SM grade was 88.92 cents/lb, translating to a delivery price of 14,961 yuan/ton; M grade was 86.99 cents/lb, translating to 14,627 yuan/ton. Notably, the M grade fell more than SM, narrowing the domestic-import spread, but without boosting import attractiveness.
Lack of Drivers on Both Sides, Short-Term Rebound Unlikely
The core logic suppressing cotton prices has not reversed. On the supply side, expectations of ample US new-crop supply persist, along with macro pressures from a strong dollar and broad commodity weakness. On the demand side, domestic textile consumption recovery remains slow, with weak terminal orders leading to high finished product inventories and tighter cash flow for mills.
This supply-demand weakness means Zhengzhou cotton, spot, and import markets will likely continue a weak, volatile trend. Short-term rebound momentum is insufficient, and only a supply shock or demand surge could break the current weakness.
Key Variables and Future Watch Points
The industry must track three key variables: US cotton region weather, which could alter production expectations; domestic textile orders, especially export orders, which directly determine restocking pace; and the yuan exchange rate, which affects import costs and export competitiveness.
From a chain perspective, falling cotton prices squeeze upstream farmers and processors, while for traders, they increase inventory depreciation risk. For downstream textile mills, while lower raw material costs help ease cost pressures, the core issue remains insufficient terminal orders, which constrains capacity utilization.