The psychological defense line of the cotton market was breached on June 23. The main Zhengzhou cotton futures contract closed at 15,905 yuan/ton, down 105 yuan from the previous trading day, breaking through the key level of 16,000 yuan/ton. This price is not just a number but a direct reflection of the industry chain's expectations for the second half of the year at the end of Q2.
Bearish sentiment dominated the futures market. The systemic decline in the commodity market was the direct trigger, but the deeper decline in the cotton sector indicates more prominent contradictions in its fundamentals. The domestic spot market weakened simultaneously, with the 3128B price index at 17,631 yuan/ton, down only 1 yuan. However, the real danger lies in low trading volumes—downstream textile enterprises are seeing slower-than-expected order recovery and rising finished product inventories. Procurement is limited to small batches on demand, with almost no willingness for large-scale stockpiling.
Dual Pressure from Macroeconomics and Supply
International market headwinds were more concentrated. The main ICE cotton contract closed at 78.59 cents/lb, down 1.03% in a single day, driven by three overlapping pressures:
- US new-season cotton planting is nearly complete, and the market has broadly raised production expectations, with ample supply expectations suppressing price upside since the planting season.
- The US dollar index continues to rise, directly weighing on the valuation of dollar-denominated commodities, with cotton, a relatively financialized variety, being the first to suffer.
- Global energy, grain, and financial assets collectively weakened, causing capital to flow out of the cotton market and further accelerating the decline.
The decline in international markets quickly transmitted to Chinese ports. On June 24, imported cotton quotations across major ports fell slightly. The international cotton price index for SM grade was 88.92 cents/lb, with a duty-paid port price of 14,961 yuan/ton; M grade was 86.99 cents/lb, with a duty-paid port price of 14,627 yuan/ton. Notably, the decline in M-grade cotton was larger than in SM-grade, and the domestic-international price spread narrowed, but the attractiveness of imported cotton did not improve.
Downstream Demand: The Real Crux
The core contradiction in current cotton prices lies not in supply but in demand. The slow recovery of domestic textile consumption is an unavoidable reality for the entire industry chain. The recovery of end-user orders has fallen far short of earlier optimistic expectations, making it difficult to digest inventory at every stage from fabric to yarn to cotton.
This demand weakness is not short-term fluctuation but a structural adjustment. On one hand, global textile and apparel consumption growth is slowing, and the destocking cycle in European and American markets is not yet complete. On the other hand, domestic end-user consumption is more rational, with limited capacity to absorb high inventories. Downstream enterprises' procurement strategies have shifted from 'active stockpiling' to 'passive replenishment,' removing the most important spot support for cotton prices.
Short-term Trends and Key Variables
The core logic suppressing cotton prices has shown no signs of reversal. The ample supply expectation for the new US season persists, macroeconomic pressures from a strong dollar and weak commodity markets remain, and domestic downstream consumption recovery is slow. Zhengzhou cotton, spot, and port imported cotton are likely to continue their weak and volatile trend, with insufficient market rebound momentum.
The industry needs to track three key variables:
- Weather changes in US cotton regions, which could affect new-season production expectations
- The actual recovery of domestic textile end-user orders, especially the start of autumn/winter orders
- RMB exchange rate trends, which directly affect imported cotton procurement costs
Only new favorable drivers from the supply-demand side can break the current persistent weakness. Until then, market participants must prepare for prices to remain low.