On July 7, the imported cotton market showed notable movement. Prices at China's main ports rose broadly, with the International Cotton Price Index (SM) jumping 1.21 cents per pound to 88.59 cents/lb, translating to a duty-paid port delivery price of 14,841 yuan/ton under a 1% tariff. The M-grade index rose 1.19 cents to 86.65 cents/lb, corresponding to 14,521 yuan/ton. While the absolute increase is modest, a daily gain exceeding 1% is unusual in recent months, signaling structural changes on the cost side.
Cost Transmission Chain
Imported cotton is a primary raw material for coastal spinning mills, particularly those in Guangdong, Shandong, and Jiangsu, where medium-count yarn capacity heavily relies on U.S. and Brazilian cotton. This price hike directly raises procurement costs. For M-grade cotton, the increase equates to roughly 200 yuan per ton, adding 100,000 yuan in monthly costs for a medium-sized mill consuming 500 tons. Downstream grey fabric and finished fabric pricing often lags by 1-2 weeks, meaning the profit window for intermediate processors is narrowing.
By variety, the spread between SM and M grades remains at 1.94 cents/lb, or about 320 yuan/ton, indicating that the premium for high-quality cotton has not narrowed amid the overall rise. This concentrates cost pressure on mills focusing on high-count and combed yarns.
Market Response and Procurement Strategy
Divergence has emerged on the trading side. Mills that signed forward contracts earlier are less affected due to locked-in prices, but small and medium enterprises relying on spot purchases face a dilemma of whether to chase the rally. Public industry data show that imported cotton port inventories are at moderate levels, with no signs of shortage, though seller reluctance to sell is increasing.
Feedback from downstream orders shows limited acceptance of price increases from apparel brands and traders. The domestic market is in a traditional off-season, while export orders face uncertainties from shipping and exchange rates. If cotton price increases persist, mills may shift product mix away from low-margin conventional items toward differentiated, functional fabrics with higher added value.
Key Variables and Outlook
The core driver of this rally is a linked rebound in ICE cotton futures, not a reversal of domestic supply-demand fundamentals. Drought expectations in Texas, the main U.S. producing region, and slow planting progress in India are the primary external supports. However, China's 2025/26 cotton output is expected to be stable, with ample Xinjiang cotton supply, suggesting the imported cotton price rise is more of a short-term emotional and capital-driven disturbance.
For buyers, current prices are in the mid-range for the year, with risks and costs of waiting coexisting. If ICE cotton finds support in the 80-85 cents/lb range, imported cotton delivery prices may oscillate between 14,000-14,500 yuan/ton. If weather speculation fades, there is room for a pullback.