The 16,000 yuan/ton psychological threshold for cotton futures was decisively broken on June 23. The Zhengzhou Cotton Exchange's main contract closed at 15,905 yuan/ton, down 105 yuan from the previous settlement, with bearish sentiment dominating. This is not merely a technical breach but a reflection of the current supply-demand stalemate: loose supply expectations upstream, sluggish consumption downstream, and textile mills caught in the middle grappling with inventory and margin pressures.
Drivers of the synchronized decline
Internationally, the ICE cotton main contract also closed lower at 78.59 cents/lb, down 1.03% on the day. The bearish drivers are clear and concentrated: U.S. cotton planting is nearly complete, leading to looser new-crop output expectations that weigh on prices long-term; a strengthening dollar directly depresses dollar-denominated commodity valuations; and systemic sell-offs in energy, grains, and other asset classes have accelerated capital outflows from cotton markets.
The external weakness quickly transmitted to Chinese ports. On June 24, imported cotton offers across major ports edged down. Under a 1% tariff, the delivery price for SM-grade was 14,961 yuan/ton, and M-grade was 14,627 yuan/ton. Notably, the M-grade decline (0.72 cents/lb) outpaced SM-grade (0.59 cents/lb), narrowing the domestic-import spread, yet the attractiveness of imported cotton did not improve.
Spot market: the real demand picture
The domestic spot market is equally unoptimistic. The China Cotton Index 3128B stood at 17,631 yuan/ton, down a mere 1 yuan—but the real story is in transaction volumes. Downstream textile mills are seeing order recovery far slower than expected, with finished goods inventories piling up. Procurement strategies have shifted to 'small-batch replenishment on demand,' with little appetite for bulk stocking.
This wait-and-see attitude means the spot market cannot provide effective price support. Critically, the decline in cotton prices has not triggered bargain-hunting among mills—because terminal demand uncertainty is too high, and enterprises are unwilling to tie up cash in inventory. The price transmission from upstream to downstream is being blocked, with fluctuating operating rates in weaving and dyeing further amplifying the contradiction.
No reversal in bearish factors, rebound conditions immature
None of the core variables suppressing cotton prices have shown signs of turning.
- Supply: The loose U.S. new-crop supply outlook will persist at least until harvest, barring significant weather anomalies in major growing regions. Supply pressure will remain.
- Macro: The dollar's strong cycle is not over, and the overall weak commodity environment exerts systemic downward pressure on cotton.
- Demand: Domestic downstream textile consumption recovery is slow, while export orders face uncertainties from overseas inventory cycles and trade policies. A strong demand stimulus is unlikely in the near term.
Zhengzhou cotton, spot, and imported cotton prices are likely to continue their weak, range-bound trend, with little rebound momentum. The industry must monitor three key variables: U.S. cotton belt weather, tangible signs of recovery in domestic textile orders, and renminbi exchange rate fluctuations. Only new bullish catalysts on the supply or demand side can break the current downtrend.