The imported cotton market saw a minor but noteworthy uptick at the end of June: on June 30, China's main port quotes edged up, with the SM International Cotton Price Index rising 0.07 cents to 86.66 cents per pound, and the M Index rising 0.08 cents to 84.79 cents per pound. Under the 1% tariff, the corresponding port delivery prices were 14,586 yuan/ton and 14,275 yuan/ton respectively. While the numbers are not dramatic, they touch on three core issues in the current industrial context: the cost floor for spinning mills, the pace of quota allocation, and the uncertainty of Sino-US trade policy.
Supply-Demand Logic Behind the Rise
In absolute terms, a gain of 0.07-0.08 cents per pound is almost market noise. But combined with the trend of the past month, where US cotton prices repeatedly tested the 85 cents level before showing signs of stabilization, it suggests that international selling willingness is strengthening and buyers are making phased replenishments. As the world's largest cotton importer, subtle changes in China's main port quotes quickly transmit to downstream yarn pricing. The SM grade's renminbi price has now firmly exceeded 14,500 yuan/ton, meaning mills using imported cotton face raw material costs 500-800 yuan/ton higher than those using domestic cotton. While the spread is not extreme, it has begun to erode profit margins for some low-count yarn varieties.
Another key factor is the exchange rate. The People's Bank of China's midpoint rate directly affects the actual port delivery price. With the renminbi recently experiencing increased two-way volatility, any depreciation would passively raise the renminbi cost of imported cotton even if US cotton prices remain unchanged, further narrowing mill profit windows.
Quota Policy and Industry Game
Behind the minor price rise, the market is more focused on quota allocation. The 1% tariff quota is nearly exhausted, and the timing and scale of the sliding duty quota release will be the key determinant of cotton price trends in H2. Historically, the window for quota policy is from May to July, but this year progress has been notably slow. If the quota is delayed, imported cotton will face greater port inventory pressure, potentially depressing spot prices; conversely, a concentrated quota release could trigger a rapid price spike from short-term demand.
For mills, strategies are highly divergent. Large enterprises tend to lock in forward cargoes below 85 cents, using hedging tools to manage risk; small and medium-sized mills are more inclined to wait for the quota before making decisions. This divergence has slowed spot market transaction pace, but basis quotes remain firm.
Differentiated Responses Across Industrial Zones
Sensitivity to this minor price rise varies significantly across cotton-producing regions. In Xinjiang, where domestic cotton supply is stable, domestic orders are less affected. In contrast, coastal mills in Shandong and Jiangsu, which rely heavily on imported cotton for high-count yarn and export orders, are more sensitive to US cotton price fluctuations. The end-June uptick has already prompted some firms in these regions to adjust product mixes, reducing the proportion of varieties heavily dependent on imported cotton and shifting toward blends or chemical fibers.
Notably, the price rise combined with slower-than-expected recovery in downstream apparel orders has extended mill inventory turnover days to 25-30 days, nearly a week longer than last year. This means even as raw material costs rise, mills dare not raise prices, instead absorbing pressure through internal cost reduction.