In May, domestic cotton prices staged a classic 'rally and retreat': the CCIndex 3128B briefly hit 18,211 yuan per ton, a two-and-a-half-year high, but the monthly average settled at 17,789 yuan. The shift reflects a widening gap between order volumes and cost pressures as the textile industry enters its traditional off-season.
Off-Season Effect: Slower Yarn Growth, Squeezed Margins
According to the National Bureau of Statistics, May yarn output was 1.869 million tons, up only 2.7% year-on-year and down 1% month-on-month. Xinjiang produced 319,000 tons, up 18.6% year-on-year but down 3.6% month-on-month. The slowdown is directly linked to insufficient new orders. Mills are purchasing cotton only for immediate needs, avoiding inventory buildup.
Cotton yarn prices rose, but lagged behind cotton. The average price of 32s pure cotton yarn was 23,277 yuan per ton, up 3.5% month-on-month, while the average cotton price rose 3.6%. This margin compression is unsustainable for smaller mills. Finished goods inventories are accumulating, and industrial cotton stocks fell to 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year.
Import Cooling: Sharp Monthly Drop, Brazil Dominates
Weak demand curbed import appetite. Customs data shows May cotton imports at 113,000 tons, down 31.7% month-on-month, though still up 2.3 times year-on-year. Brazil accounted for 57.7% of imports, with US cotton rising to 22.1%, reflecting improved trade sentiment after US-China talks.
Cumulative imports for January-May reached 825,000 tons, up 91% year-on-year. Together with domestic commercial inventories of 3.745 million tons (up 8.3% year-on-year), the supply side remains ample. The USDA May report raised global 2025/26 production to 26.702 million tons and consumption to 26.156 million tons, with ending stocks at 16.823 million tons—all at multi-year highs.
Export Recovery but Structural Divergence
Textile and apparel exports in May reached $25.6 billion, up 6.5% month-on-month but down 2.3% year-on-year. The cumulative January-May figure was $116.73 billion, up 0.1%. The recovery was driven by US and EU markets, which grew 24.7% and 25.6% month-on-month respectively. Exports to Belt and Road countries rose 9.7%.
However, cotton garment exports fell 3.7% year-on-year to $2.04 billion, indicating non-cotton products are filling the gap. Exporters focused on cotton goods should monitor structural shifts in end-consumer demand.
Price Outlook: Narrowing Spread, Weather Risks
Average domestic cotton price in May was 17,789 yuan per ton, up 23.1% year-on-year and 3.6% month-on-month. The international Cotlook A index averaged 92 US cents per pound, equivalent to 15,518 yuan per ton after 1% tariff, a discount of 2,270 yuan—narrowing by 257 yuan from April. The narrowing spread reduces the appeal of imports, but domestic prices remain high relative to global benchmarks, dampening mill buying.
On the supply side, national cotton planting is 99.5% complete. However, persistent rainfall in inland regions has caused waterlogging, slowing seedling growth. Only 85.5% of cotton is at the 4-8 true leaf stage, down 8.9 percentage points year-on-year. While this may impact yields, the market is currently more focused on near-term demand weakness.