On June 23, China's commodity markets broadly declined, with the cotton sector under particular strain. The main Zhengzhou Cotton Futures contract breached the critical psychological threshold of 16,000 yuan/ton during trading, closing at 15,905 yuan/ton, down 105 yuan from the previous settlement. This level represents not just a technical breakdown but also reflects waning confidence across the industrial chain. The spot market weakened in tandem, with the domestic 3128B cotton price index edging down 1 yuan to 17,631 yuan/ton, though trading volumes were light. Downstream textile mills reported order recovery falling well short of expectations, leading to rising finished goods inventories and a conservative procurement strategy—small, need-based restocking became the norm, with little appetite for bulk purchases. This left the spot market without effective price support, trapping the market in a negative cycle of 'futures leading, spot following, and volumes shrinking.'
Overseas Bearish Factors Converge, Pressuring Imported Cotton Quotes
On international markets, bearish factors were concentrated. The ICE cotton futures for July settled at 78.59 cents/lb on June 23, a single-day decline of 1.03%. The drop was driven by three pressures: first, the US cotton planting season is nearing completion, and the market has raised its expectations for new-crop production, creating a long-term overhang on prices; second, a strengthening US dollar index weighed on dollar-denominated commodity valuations; and third, a broad sell-off across global energy, grains, and financial assets triggered systemic capital outflows from the cotton market. The overseas decline quickly transmitted to China's ports. On June 24, imported cotton quotes at major ports fell across the board. The International Cotton Price Index for SM grade (high quality) dropped 0.59 cents to 88.92 cents/lb, translating to a delivered port price of approximately 14,961 yuan/ton. The M grade (mid-quality) fell 0.72 cents to 86.99 cents/lb, translating to about 14,627 yuan/ton. Notably, mid-grade M cotton fell more sharply, narrowing the domestic-imported price spread, but this did not enhance the appeal of imported cotton.
Industrial Chain Transmission: From Futures to Spot to Downstream
The current market shows a clear transmission pathway: bearish sentiment in the futures market depresses spot prices, and weak spot purchasing in turn reinforces futures weakness. The plight of downstream textile mills is the key link—sluggish end-user order recovery and high finished goods inventories leave mills with little incentive to actively restock, preferring to wait and buy hand-to-mouth. This 'demand restraint' directly undermines the price floor for cotton. From an industrial cluster perspective, new-crop planting area in Xinjiang remains stable, and weather factors have yet to create a material production shortfall; meanwhile, inland textile mills face thin margins and low capacity utilization. Overall, the cotton market is unlikely to shake off the dual pressure of 'ample supply expectations + weak demand recovery' in the near term.
Practical Recommendations
For Buyers - With prices in a downtrend, control purchasing cadence and maintain only 1-2 weeks of safety stock to avoid large inventory accumulation. - Monitor the domestic-imported price spread; when it narrows to within 800 yuan/ton, consider moderately increasing imported cotton purchases to reduce raw material costs. - Utilize futures tools for hedging: establish virtual inventory in batches below 16,000 yuan/ton to lock in future procurement costs.
For Foreign Trade Companies - Under a strengthening dollar, USD-denominated imported cotton costs are relatively pressured, but yuan exchange rate volatility remains a risk. Negotiate forward settlement contracts with banks to lock in exchange rates. - For export orders, track overseas end-consumer data, especially US apparel retail inventory changes, to avoid finished goods build-up from delayed or canceled orders. - Closely monitor US cotton belt weather and USDA monthly supply-demand reports; if new-crop production expectations are further raised, adjust procurement strategies proactively.
In summary, the cotton market is in a phase of 'weak reality, weak expectations.' A rebound requires new bullish catalysts—either a weather-driven supply disruption or a tangible demand recovery. Until such signals emerge, cotton prices are likely to remain weak and range-bound. Industry participants should maintain caution and prioritize risk management.