Zhengzhou cotton futures broke through the key psychological threshold of 16,000 yuan per ton, a level that had been seen as a strong support over the past two years. On June 23, the main contract closed at 15,905 yuan per ton, down 105 yuan from the previous settlement, with bearish sentiment notably rising. On the same day, the ICE cotton main contract closed at 78.59 cents per pound, down 1.03%, forming a pattern of synchronized declines in both domestic and international markets.
Driving Forces: Triple Headwinds Converge
The current decline is not driven by a single factor. First, US cotton planting progress is nearing completion, and the market has generally raised expectations for the new season's output, with ample supply expectations persistently capping price upside. Second, a stronger US dollar directly suppresses the valuation of dollar-denominated commodities, and cotton is no exception. Third, global energy, grain, and financial sectors collectively weakened, with systemic selling pressure driving capital outflows from the cotton market.
The domestic spot market also showed little improvement. The 3128B cotton price index stood at 17,631 yuan per ton, down only 1 yuan, but this slight decline masks a deeper issue: downstream textile mill orders have not recovered as expected, finished product inventories are piling up, and purchasing is limited to small batches on an as-needed basis. The market's willingness to build large inventories is weak, making it difficult for the spot market to provide effective price support.
Imported Cotton Market: Narrowing Spread but No Pickup in Buying
The external decline directly transmitted to China's imported cotton market. On June 24, import quotes at major ports fell across the board. The international cotton price index for SM grade stood at 88.92 cents per pound, down 0.59 cents, with a delivered price of 14,961 yuan per ton; the M grade stood at 86.99 cents per pound, down 0.72 cents, with a delivered price of 14,627 yuan per ton. Notably, the M grade fell more than the SM grade, and the domestic-import spread narrowed.
However, the narrowing spread did not boost the appeal of imported cotton. For textile mills, the core issue is not price but insufficient terminal orders leading to shrinking raw material demand. Even if imported cotton becomes more competitive, mills will not increase inventories without a substantive improvement in end-user demand.
Industry Impact: From Price Signals to Real Operations
The price drop below 16,000 yuan means different things for different segments of the supply chain. Upstream ginners face inventory depreciation risks; cotton purchased at higher prices earlier is now unprofitable. Some may be forced to hedge or sell at a discount, further exacerbating spot market pressure.
Midstream traders see their operating room shrink. In a persistently weak price environment, the risk of holding inventory increases, and the buffer function of the intermediate link is weakened. Traders prefer quick turnover or reduced positions, leading to lower market liquidity.
Downstream textile mills appear to benefit from lower raw material costs, but the reality is different. Insufficient terminal orders remain the industry's core pain point. Even as cotton prices fall, intermediate products like yarn and grey fabric also weaken, leaving profit margins unchanged. More critically, the demand weakness signaled by falling prices reinforces mills' wait-and-see attitude, creating a negative feedback loop where lower prices lead to even less buying.
Outlook: Rebound Conditions Not Yet Ripe
The core logic suppressing cotton prices shows no sign of reversal. The ample supply expectation for the new US crop persists, macro pressure from a stronger dollar and broad commodity weakness remains, and domestic textile consumption recovery is slow, with weak demand-side support.
Zhengzhou cotton, spot market, and imported cotton are likely to continue their weak, volatile trend with limited rebound momentum. The industry needs to monitor three key variables: weather conditions in US cotton regions that could alter production expectations; any marginal improvement in domestic textile orders; and the impact of renminbi exchange rate movements on imported cotton costs. Only new positive catalysts on either the supply or demand side can break the current downtrend.