Cotton prices are oscillating in a tug-of-war between supply and demand forces. According to the latest China Cotton Market weekly data, the average price of Zhengzhou cotton futures main contract stood at 15,869 yuan/ton, down 0.2% from the previous week, while the international cotton index (M) averaged 86.37 cents/lb, translating to an import cost of 14,337 yuan/ton. The domestic-import spread remains high at 3,140 yuan/ton, meaning domestic cotton holds no price advantage, and imported cotton offers better value for textile mills.
Bull-Bear Standoff: Supply Tightening vs. Weak Demand
The expectation of tightening global cotton supply is the core support for current prices. U.S. cotton planting has reached 92%, but the good-to-excellent rate is only 44%, still at a low level despite a 9-percentage-point year-on-year improvement. India's monsoon rainfall is about 43% below the historical average, putting the cotton planting season under severe threat. If the El Niño effect persists, new-season output could drop significantly. In China's Xinjiang region, cotton has entered the squaring-to-flowering stage. While northern Xinjiang enjoys favorable water and heat conditions, southern Xinjiang faces localized irrigation pressure due to high temperatures and enhanced evapotranspiration. These factors collectively represent potential supply-side risks.
However, weak demand is equally concerning. The current period is a traditional off-season for textiles, and the substitution effect of chemical fibers is intensifying. Polyester staple fiber prices have fallen to 7,365 yuan/ton, down 128 yuan/ton from the previous week, further squeezing cotton's consumption space. Mills maintain low raw material inventories and only purchase for immediate needs, showing little restocking appetite. This pattern—supply-side narratives without demand-side momentum—prevents prices from forming a clear trend.
Industry Profit Divergence: Resilience with Underlying Concerns
National Bureau of Statistics data shows that from January to May, profits of industrial enterprises above designated size grew 18.8% year-on-year, with the textile industry's profit up 11.7%, demonstrating good resilience. But this data may not fully reflect the reality of cotton mills. Domestic C32S combed yarn averaged 23,274 yuan/ton, up only 9 yuan/ton from the previous week, while imported yarn was flat at 23,039 yuan/ton, leaving a narrow spread of just 235 yuan/ton. Imported yarn remains competitive.
Notably, polyester staple fiber prices fell more sharply than cotton, further strengthening the substitution logic. For mills, the range of raw material choices is expanding, but this also means profits in the cotton textile chain are being diverted to chemical fiber products. The overall profit growth in the textile industry likely comes from non-cotton fibers or finished garments, rather than pure cotton spinning.
External Variables: Middle East Situation and Monetary Policy
Recent easing in the Middle East, with a U.S.-Iran memorandum of understanding temporarily opening the Strait of Hormuz for 60 days, has pushed international oil prices back to pre-conflict levels. This has two implications for textiles: lower oil prices reduce chemical fiber raw material costs, further pressuring cotton; and shipping capacity may be released, easing the previous container shortage and high freight costs, benefiting both cotton imports and garment exports.
On the monetary front, the central bank injected 200 billion yuan through medium-term lending facility operations, ensuring ample liquidity and lowering capital market financing costs. This is positive for textile enterprises' financing environment, but whether it translates into actual procurement demand depends on the recovery of end-user orders.