May's cotton market was a tug-of-war: upstream policy positives clashed with mid- and downstream demand weakness, sending prices to a two-and-a-half-year high before a sharp retreat. For textile mills, this was not just price volatility—it was a concentrated reflection of profit distribution imbalance across the chain.
Price Game Under Weak Supply and Demand
On May 7, the CCIndex 3128B hit 18,211 yuan/ton, a two-and-a-half-year high. But the peak did not last. As off-season orders contracted, prices fell. Late in the month, the new Xinjiang cotton target price policy briefly lifted sentiment, but the monthly average of 17,789 yuan/ton was still up 23.1% year-on-year.
Internationally, the Cotlook A index averaged 92 US cents/lb, up 18% year-on-year. After applying a 1% tariff, it was 2,270 yuan lower than domestic prices, with the spread narrowing by 257 yuan from the previous month. This means imported cotton's price advantage is shrinking, but domestic mills' tolerance for high prices is also declining.
Order-side signals were even clearer. May national yarn output was 1.869 million tons, up only 2.7% year-on-year and down 1% month-on-month; Xinjiang output was 319,000 tons, down 3.6% month-on-month. The average price of 32s pure cotton yarn was 23,277 yuan/ton, up 795 yuan month-on-month, but the increase was far smaller than that of cotton, squeezing mill margins.
Inventory Structure Signals Caution
The divergence between commercial and industrial stocks reveals different mindsets. By end-May, commercial stocks stood at 3.745 million tons, up 8.3% year-on-year, indicating ample supply. Industrial stocks were 846,000 tons, down 10.1% year-on-year, suggesting mills were reluctant to build inventory.
This caution extended to imports. May cotton imports were 113,000 tons, down 31.7% month-on-month, though still up 2.3 times year-on-year. Brazilian cotton accounted for 57.7%, US cotton 22.1%, reflecting heightened price and shipping sensitivity.
Seedling Conditions and Policy Variables
New cotton planting is largely complete, but seedling conditions are not optimistic. By end-May, 85.5% of national cotton was at the 4-8 true leaf stage, down 8.9 percentage points year-on-year. Although some Xinjiang fields have entered the budding stage, overall seedling conditions are worse than last year. Only 45.9% of surveyed households rated seedling conditions as better or equal to last year, down 34 percentage points. Persistent rain in inland areas caused waterlogging.
On the policy front, the China Cotton Industry Development Summit held in Chongqing on May 28-29, themed "Transformation and Reconstruction: Shaping a New Global Cotton Pattern," launched cotton product origin evaluation work. This may alter trade flows in the medium to long term but has limited short-term impact.
Structural Opportunities in Export Recovery
May textile and apparel exports were $25.6 billion, up 6.5% month-on-month but down 2.3% year-on-year. Exports to the US and EU grew 24.7% and 25.6% month-on-month, respectively, while those to Belt and Road countries rose 9.7%. The US and EU market growth was notable, partly due to progress in Sino-US trade talks and the zero-tariff policy for Africa.
However, cotton garment exports were $2.04 billion, down 3.7% year-on-year but up 11.9% month-on-month. This indicates non-cotton products are growing faster, while cotton products are still recovering.