May's cotton import data sends a contradictory signal: a sharp month-on-month decline but a 2.3-fold year-on-year surge. This reflects the tug-of-war between seasonal textile slowdown and policy support. For buyers, rising cotton prices and divergent orders demand more refined procurement strategies.
Import Volume Fluctuation: Seasonal Slowdown and Structural Support
Customs data shows China imported 110,000 tons of cotton in May, down 31.7% month-on-month, but cumulative imports for the first five months reached 830,000 tons, up 90.7% year-on-year. The month-on-month decline is mainly due to two factors: higher international cotton prices weakened foreign cotton's cost advantage, and the downstream textile sector entered its traditional off-season with insufficient new orders, prompting mills to rely on domestic inventories and slow foreign purchases. However, the year-on-year surge is supported by a low base in the same period of 2025 and the phased implementation of additional sliding-duty quotas. Cumulative imports for the first nine months of the 2025/26 season totaled 1.305 million tons, up 45% year-on-year, indicating robust annual demand.
By origin, Brazilian cotton's share rose to 58%, maintaining its top position. Australian cotton's share fell due to tight spot supply. US cotton's share increased by 7 percentage points to 22%, driven by rush orders for garment exports to the US. Kazakhstan and Afghanistan saw their shares drop to 5% and 4%, respectively, highlighting the supply instability of Central Asian cotton. In terms of trade mode, bonded warehouse entries accounted for 45%, special customs supervision zone logistics for 43%, and general trade for only 7%, indicating that imported cotton mainly circulates through bonded channels.
Price Transmission: Upstream Cost Pressure Meets Downstream Order Divergence
The average import price rose to $1,699/ton in May, up 2.6% month-on-month but still down 11.9% year-on-year. By origin, Brazilian cotton averaged $1,615/ton (up 2.1% month-on-month), US cotton $1,856/ton (up 7.6%), and Australian cotton $1,948/ton (up 8.3%). Australian cotton saw the largest increase, driven by domestic drought-induced production cuts. Persistent drought in major overseas producing regions, especially for US and Australian cotton, is pushing up raw material costs for mills.
Cost increases are offset by divergent downstream orders. May textile and apparel exports totaled $25.61 billion, down 2.3% year-on-year but up 6.5% month-on-month. Apparel exports reached $13.02 billion (up 14.7% month-on-month), driven by concentrated shipments of summer orders, while textile exports were $12.59 billion (down 0.9% month-on-month), indicating a pause in overseas fabric restocking. This 'strong apparel, weak fabric' structure suggests upstream yarn and grey fabric demand may face pressure, while apparel processing margins are being squeezed by rising cotton costs.
Global Supply-Demand Adjustment: Australian Output Cut Does Not Alter Loose Pattern
The USDA June 2025/26 global cotton supply-demand report shows a slight increase in production (33,000 tons), a slight decrease in consumption (54,000 tons), an export increase of over 1%, and a significant inventory drawdown of over 131,000 tons, bringing the stock-to-use ratio down to 64%. Production growth came from Egypt, while consumption declines were concentrated in Bangladesh, Pakistan, and South Korea, partially offset by increases in China and Vietnam. Export growth was mainly from Brazil, the US, Kazakhstan, and Turkey.
Australia's output cut is the most notable structural change. ABARES lowered 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. The main drivers are tight irrigation water in eastern growing regions and below-average rainfall during the growing season. However, irrigation-based stable yields mean output is still 20% above the 10-year average, indicating a cyclical rather than trend decline. For buyers, Australia's temporary supply tightness may boost its price premium, but global stock-to-use ratio of 64% remains high, meaning overall supply is not scarce.