The fragility of the cotton market was exposed on June 23. The main contract of Zhengzhou Cotton futures closed at 15,905 yuan per ton, down 105 yuan from the previous settlement price, breaking through the key psychological level of 16,000 yuan per ton. This is not an isolated decline but the result of multiple bearish factors resonating in both domestic and international markets.
Bearish Factors Overlap, Price Transmission Chain Clear
In the international market, the main ICE cotton futures contract also fell, closing at 78.59 cents per pound, a single-day decline of 1.03%. The drivers of the decline are clear: US cotton planting progress is nearing completion, and market expectations for the new season's production are leaning towards a looser supply; the US dollar index continues to rise, putting downward pressure on the valuation of dollar-denominated commodities; and the systemic decline in global energy, grain, and financial markets has further withdrawn funds from the cotton market.
The weakness in the international market quickly transmitted to domestic ports. On June 24, import cotton quotes at main ports all saw slight declines. Calculated based on a 1% tariff and the China Bank foreign exchange mid-rate, the international cotton price index SM grade was reported at 14,961 yuan per ton, down 0.59 cents per pound; the M grade was reported at 14,627 yuan per ton, down 0.72 cents per pound. Notably, the decline in medium-grade M cotton was greater than that in high-grade SM cotton. The price spread between domestic and international cotton narrowed simultaneously, but the purchasing appeal of imported cotton did not increase.
Spot Market Lacks Support, Downstream Demand Recovery Weak
The performance of the domestic spot market was equally sluggish. The 3128B cotton price index was reported at 17,631 yuan per ton, a slight decline of 1 yuan, but this subtle fluctuation cannot conceal the real weakness in the market. The recovery of orders for downstream textile enterprises is far below expectations, with finished product inventories continuing to accumulate. Enterprise procurement strategies have fully shifted to a conservative stance, with only small-scale replenishment on demand, and the market lacks the willingness for large-scale stockpiling. This weakness on the demand side makes it difficult for spot prices to form effective support.
From an industrial logic perspective, the current weakness in cotton prices is essentially a dual squeeze from expectations of loose supply on the supply side and sluggish recovery on the demand side. The upward revision of production expectations for the new US cotton season implies a more ample global supply pattern. Meanwhile, the recovery of domestic textile terminal consumption has not yet shown clear signs of acceleration.
Short-Term Rebound Unlikely, Three Variables Determine Future Direction
The core logic currently suppressing cotton prices has not shown any signs of reversal. The expectation of ample US cotton supply will persist, and the macro pressures from a strong US dollar and overall weakness in bulk commodities are unlikely to dissipate in the short term. The pace of recovery in domestic downstream textile consumption is the key internal factor determining whether cotton prices can stabilize, but currently, this variable does not yet possess positive driving capability.
Zhengzhou cotton futures, spot prices, and import cotton at ports are likely to continue their weak and volatile trend. For the market to break the current weak pattern, it requires new positive drivers on the supply-demand side. The industry should continuously monitor three key variables: weather changes in US cotton-growing regions, which could affect new season production expectations; the actual inflection point for domestic textile terminal orders; and the impact of RMB exchange rate fluctuations on the cost of imported cotton.