Domestic cotton prices have sharply accelerated their uptrend this week, with the core driver being Xinjiang output reduction expectations and ongoing commercial inventory drawdowns. The Zhengzhou Cotton Futures main contract settlement average reached 16,099 yuan per ton, up 230 yuan or 1.4% from the previous week. Meanwhile, the National Cotton Price B Index, representing inland standard-grade lint cotton market prices, averaged 17,643 yuan per ton, up 166 yuan week-on-week.
Divergence in Domestic and International Price Trends
Compared to the international market, domestic cotton's strength is more pronounced. The New York Cotton Futures main contract weekly average was only 77.05 US cents per pound, down 0.50 cents from the prior week. The International Cotton Index M, representing CIF main Chinese ports, averaged 85.26 cents per pound, down 1.11 cents week-on-week. At a 1% tariff, imported cotton costs about 14,115 yuan per ton, 222 yuan lower than the previous week, widening the domestic-import spread.
This divergence reflects fundamentally different supply-demand dynamics. Domestically, the combination of Xinjiang weather risk fermentation and declining stocks has created strong supply-tightening expectations. Internationally, macro headwinds such as escalating US-Iran tensions, new EU regulations, and declining textile and apparel exports from major Southeast Asian countries have exerted downward pressure.
Producing Region Weather: Xinjiang Heat Test and Global Growth Divergence
Cotton across Xinjiang has entered the early flowering stage, with growth progress generally in line with normal years. Some areas in southern Xinjiang have experienced periodic high temperatures, increasing evapotranspiration and raising field management difficulty. However, thanks to irrigation guarantees and fine management, no large-scale damage has occurred yet. However, China's Central Meteorological Observatory predicts sustained high temperatures of 37-43 degrees Celsius from July 1 to 7 in northwest and south-central North China, coinciding with the critical period when cotton enters the peak flowering and boll-setting stage. The duration of heat stress, water and fertilizer supply capacity, and extreme weather evolution will be core variables determining final yield.
Growth conditions in other major global producing regions are also divergent. USDA crop progress data shows US cotton planting is essentially complete, with squaring and boll-setting progress generally improving year-on-year. The June 30 planted acreage report indicates 2026 US cotton planted area at 9.85 million acres, up 6% year-on-year. In India, the meteorological department says July monsoon rainfall is expected to be below normal, with Reuters reporting Indian cotton acreage down 35% year-on-year. Brazil's new cotton harvest continues to advance, with exports faster than last year—exporting 146,800 tons in the first 14 working days of June, 10.6% higher than June 2025.
Downstream Transmission: Chain Reactions in Yarn and Polyester Staple Fiber
Rising raw material costs have begun transmitting downstream. Domestic C32S carded yarn weekly average prices fluctuated slightly to 23,264 yuan per ton, down 10 yuan from the prior week. Meanwhile, the same specification yarn from major source countries averaged 22,861 yuan per ton, down 178 yuan week-on-week, widening the domestic-import spread to 403 yuan. This means foreign yarn's price advantage is further enhanced, potentially squeezing domestic spinners' market share.
Polyester staple fiber prices continued their downtrend, falling 178 yuan to 7,187 yuan per ton week-on-week. The widening gap between chemical fiber and cotton may prompt some spinning mills to adjust raw material blends, creating substitution pressure on cotton demand in the short term.
Policy and Macro: New Regulations and External Risks
The EU has implemented fixed tariffs on cross-border small parcels under 150 euros from July 1, while the Ecodesign for Sustainable Products Regulation takes effect July 19, banning destruction of unsold clothing. These policies will directly increase export costs to Europe and create headwinds for textile and apparel consumption. Major Southeast Asian countries have already seen declining textile and apparel exports: Bangladesh's May exports were only $440 million, down 90% month-on-month and year-on-year; Cambodia's exports were $180 million, down 88% month-on-month and 87% year-on-year; Vietnam's April exports were $3.72 billion, down 9% month-on-month and 4% year-on-year.
Domestically, June's manufacturing PMI stood at 50.3%, up 0.3 percentage points month-on-month, returning to expansion territory. Industrial enterprise profits above designated size grew 18.8% year-on-year. CCPIT data shows the textile, apparel, and leather products industry ranks among the top three in terms of overseas exhibition project numbers, indicating traditional advantageous industries still show resilience.