The spread between domestic and imported cotton prices has widened to 3,140 yuan per ton, a clear signal of the tug-of-war between supply tightening expectations and seasonal demand weakness. As the global cotton supply outlook remains uncertain, China's textile sector enters its traditional low season, pinning prices in a tight range.
Price Divergence: A Structural Signal
Weekly data reveals a subtle divergence between domestic and international cotton markets. Zhengzhou cotton futures averaged 15,869 yuan/ton, down 25 yuan from the prior week, while the Cotlook A Index (M grade) rose 0.6% to 86.37 cents/lb. In China's spot market, the National Cotton Price B Index averaged 17,477 yuan/ton, up 30 yuan. The resulting spread of 3,140 yuan/ton underscores the persistent cost advantage of imported cotton, dampening demand for domestic supplies. Downstream, C32S combed cotton yarn averaged 23,274 yuan/ton, barely moving, while polyester staple fiber fell 128 yuan to 7,365 yuan/ton, intensifying substitution pressure.
Supply: Weather and Policy Crosscurrents
Supply-side uncertainties are mounting. US cotton planting for the 2026/27 season reached 92% completion, slightly ahead of last year, but the quality rating in Texas—the top-producing state—stands at just 44% good/excellent. Meanwhile, India's monsoon rainfall is 43% below the historical average, threatening the upcoming crop. A temporary détente in the Middle East has eased shipping disruptions, with daily oil transit through the Strait of Hormuz recovering to 4.8 million barrels, but this has not fundamentally altered raw material cost expectations. In China's Xinjiang region, 94-95% of cotton plants have squaring, though southern areas face irrigation stress from high temperatures.
Demand: Seasonal Lull and Substitution Pressure
Demand remains the weaker link. Mills are operating with low inventory levels, buying only for immediate needs. National Bureau of Statistics data shows textile industry profits rose 11.7% year-on-year in the first five months, but this has not triggered restocking. The central bank's net injection of 200 billion yuan via MLF provides liquidity support, but its impact on real demand is delayed.