China's cotton imports in May 2026 reached 110,000 tons, a sharp 31.7% month-on-month decline but still 2.3 times higher year-on-year. This contrast highlights the tug-of-war between weakening downstream demand and rising international cotton prices, reshaping mills' restocking strategies.
Structural Shift in Import Sources: Brazil Dominates, US Cotton Rebounds
Brazilian cotton further consolidated its top position, accounting for 58% of May imports, benefiting from its competitive price of $1,615/ton. US cotton saw its share jump 7 percentage points to 22%, driven by concentrated production of garment orders for the US market. Australian cotton's share declined due to tight spot supply, while Kazakhstan and Afghanistan fell to 5% and 4%, respectively.
In terms of trade mode, bonded warehouse transactions remained the largest at 45%, followed by special customs supervision zone logistics at 43%. General trade dropped to 7%, indicating that imported cotton mainly enters processing trade channels, limiting its direct impact on the domestic spot market.
Rising Cost Anchor: Price Increases Reflect Supply Tightness
The average import price rose 2.6% month-on-month to $1,699/ton, though still down 11.9% year-on-year. US cotton surged 7.6% to $1,856/ton, while Australian cotton hit $1,948/ton, up 8.3%. Brazilian cotton saw a modest 2.1% increase to $1,615/ton, reinforcing its cost advantage.
- Persistent drought in major overseas producing areas, especially the US and Australia, pushed up premiums for these origins.
- Brazil's stable output and smooth logistics kept its price rise in check, making it the go-to option for cost-sensitive buyers.
- For Chinese mills, the rising import cost means margin compression, particularly for low-to-medium count yarn producers, who may delay new purchases and rely on existing inventories.
Globally, the USDA June report showed ending stocks down over 131,000 tons, pushing the stocks-to-use ratio to 64%. Export estimates were revised up over 1%, while consumption was trimmed by 5,400 tons, with Bangladesh, Pakistan, and South Korea cutting intake, partially offset by increases in China and Vietnam.
Structural Impact of Australian Cotton Reduction: Irrigation Constraints
ABARES cut its 2025/26 Australian cotton output estimate to 1 million tons, down 16% year-on-year, with planted area falling 12% to 6.825 million mu. Water shortages and below-average rainfall in eastern growing regions were the main causes. Although output remains 20% above the 10-year average due to irrigation support, the reduction signals tighter supply for high-grade cotton in coming quarters.
Mills relying on Australian cotton for high-count yarns and premium fabrics should explore alternatives. Brazilian cotton offers a viable substitute in terms of price and volume, but differences in fiber length and strength may require product adjustments.
Downstream Transmission: Weak Season Orders and Export Divergence
May textile and apparel exports totaled $25.61 billion, up 6.5% month-on-month but down 2.3% year-on-year. Apparel exports rose 14.7% month-on-month to $13.02 billion, driven by summer order shipments, while textile exports slipped 0.9% to $12.59 billion, signaling that overseas fabric restocking has largely concluded. Cumulative exports for January-May were $116.74 billion, nearly flat year-on-year.
This divergence means that while garment orders temporarily boosted demand for specific cotton origins like US cotton, the fabric segment's weakness will likely suppress overall mill restocking. The sharp month-on-month drop in May imports is a direct reflection of insufficient new orders and reliance on domestic inventory.