Domestic cotton prices continue to firm on tightening supply and weather risks, while international prices oscillate narrowly between macro headwinds and easing weather conditions in US growing regions. Latest weekly data shows Zhengzhou Cotton Futures main contract settlement average hit 16,099 yuan/ton, up 230 yuan/ton or 1.4% week-on-week; the National Cotton Price B Index rose to 17,643 yuan/ton, up 0.9%. This cost pressure is now transmitting downstream to textile mills, forcing buyers to recalibrate replenishment strategies and pricing tactics.
Fundamentals: Output fears and inventory drawdown converge
Xinjiang cotton is entering the critical blooming and boll-setting phase, but the Central Meteorological Observatory forecasts persistent extreme heat of 37-43°C in northwest and south-central North China in early July, directly threatening pollination and boll retention. While overall crop development in Xinjiang is on par with normal years, parts of southern Xinjiang have already seen increased field management costs due to intermittent heat. If the heatwave persists, yield per unit area could become the core variable for cotton prices in H2 2026.
Meanwhile, commercial inventory drawdown continues unabated. Domestic mills' raw material stocks are at historically low to medium levels, and Xinjiang output concerns have evolved from market speculation to industry consensus. This supply-side contraction expectation resonates with low inventories, providing a bullish logic for futures. In contrast, international cotton prices eased as US growing areas saw drought relief and planted area expanded 6% year-on-year. NY Cotton Futures main contract average fell to 77.05 cents/lb, down 0.6% for the week. The domestic-import spread has widened further, with imported cotton cost at 14,115 yuan/ton, about 3,500 yuan/ton cheaper than domestic, making imports increasingly attractive.
Global supply chain: India's 35% drop in planting and Southeast Asia export slump
India's cotton planting area has plunged 35% year-on-year, the most alarming signal for global cotton supply in 2026. The Indian Meteorological Department expects July monsoon rainfall below normal, exacerbating output fears. As the world's second-largest cotton producer, India's reduction directly compresses global exportable supply, with immediate implications for major importers like China, Bangladesh, and Vietnam.
Southeast Asian textile and apparel exports continue to slide. In May, Bangladesh's exports fell to just $440 million, down 90% both month-on-month and year-on-year; Cambodia's exports were $180 million, down nearly 90%. In April, Vietnam's exports reached $3.72 billion, down 9% month-on-month and 4% year-on-year. These figures reflect both sluggish final demand in Europe and the US, and the impact of recent EU trade policies. The EU began imposing fixed tariffs on cross-border parcels under €150 from July 1, and the Ecodesign for Sustainable Products Regulation takes effect July 19, banning destruction of unsold clothing. These policies will significantly raise compliance costs for cross-border e-commerce and fast fashion brands, dampening procurement from Southeast Asia.
Macro environment: Manufacturing recovery and trade resilience
Domestic macro indicators are turning positive. June manufacturing PMI rose to 50.3%, returning to expansion territory; profits of industrial enterprises above designated size grew 18.8% year-on-year. China Council for the Promotion of International Trade data shows textile, apparel, and leather products remain among the top three industries for overseas exhibitions, indicating sustained vitality in traditional export sectors. However, the US-Iran situation adds oil price uncertainty; if the Strait of Hormuz is disrupted, chemical fiber raw material costs could spike. Polyester staple fiber prices have already fallen to 7,187 yuan/ton, down 2.4% for the week, but this may be a short-term emotional reaction.
Outlook: Cotton prices to stay elevated, policy window warrants attention
Overall, the global cotton supply-demand balance is tightening—Xinjiang output concerns, India's 35% planting decline, and limited US acreage expansion, while demand side faces headwinds from Southeast Asian export declines but is supported by China's manufacturing recovery and trade resilience. Short-term cotton prices are likely to remain elevated and volatile. The market is closely watching the outcome of US Section 301 tariff hearings and actual import volumes after India removed cotton import duties.