On June 23, China's commodity markets experienced a systemic downturn, with the cotton sector bearing the brunt. The main contract of Zhengzhou Cotton Futures breached the critical psychological threshold of 16,000 yuan/ton, closing at 15,905 yuan/ton, down 105 yuan for the day. This level is not just a technical support but represents a collective downward revision of the market's valuation center for cotton.
Simultaneously, the ICE cotton main contract closed at 78.59 cents/lb, a drop of 1.03%. The external decline quickly transmitted to China's major port import cotton market. On June 24, import cotton quotations saw a modest overall decline, with the SM grade converted to 14,961 yuan/ton and the M grade to 14,627 yuan/ton. The M grade fell more sharply than the SM grade, indicating greater pressure on mid-grade cotton.
Dual Pressure from Macroeconomics and Supply
The current weakness in the cotton market is not a result of a single factor but a resonance of multiple bearish forces. First, at the macro level, the persistent strengthening of the US dollar index suppresses the valuation of dollar-denominated commodities. Meanwhile, global energy, grain, and financial assets have collectively weakened, leading to a systemic outflow of capital from commodity markets, making it difficult for cotton to stand alone as a risk asset.
On the supply side, US cotton planting is nearing completion, and market expectations for the new season's production are leaning toward loosening. This expectation is not a short-term disturbance but a structural factor that will continue to suppress upward price momentum throughout the growing cycle. Unless extreme weather occurs, this tone of ample supply is unlikely to reverse.
Domestically, the spot market offers no support either. The 3128B price index stood at 17,631 yuan/ton, a marginal decrease of 1 yuan, but trading volumes were extremely thin. The recovery in orders for downstream textile mills has fallen well short of expectations, with finished product inventories piling up. Procurement strategies have fully shifted to 'need-based small batch replenishment,' and willingness for bulk purchasing has hit rock bottom. This has created a stalemate of 'price without volume' in the spot market.
Signals Behind the Narrowing Price Spread
A noteworthy detail is that in import cotton quotations, the M grade fell more than the SM grade. This is not accidental; it reflects that at current price levels, the purchasing appeal of mid-grade cotton has not improved despite the price reduction. The simultaneous narrowing of domestic and international cotton price spreads actually indicates that the cost advantage of imported cotton is being weakened, not enhanced.
For textile enterprises reliant on imported cotton, this means that while raw material costs have eased slightly, the constraint of weak terminal demand is more fundamental. Even if import cotton prices drop, companies will not increase procurement rashly due to price spread changes unless downstream orders show substantial improvement. This is the core contradiction in the current market.
Short-Term Rebound Lacks Core Drivers
In summary, the core logic chain suppressing cotton prices shows no signs of reversal. The expectation of ample new-season US cotton supply persists, the macro environment of a strong dollar and overall commodity pressure remains, and the recovery of domestic downstream consumption is slow. Under these triple pressures, Zheng Cotton, spot, and import cotton are likely to continue their weak and volatile trend.
To break the current stalemate, the market needs new positive drivers from the supply-demand side. These could come from three areas: abnormal weather in major US cotton-producing regions, a substantial recovery in domestic textile terminal orders, or significant changes in the RMB exchange rate. Until these variables show a clear direction, the cotton market is unlikely to see a meaningful rebound.