On July 9, imported cotton quotes at China’s main ports fell slightly, with the international cotton price index (SM) dropping to 90.92 cents per pound, down 0.61 cents from the previous day. Under a 1% tariff, the general trade port delivery price was approximately 15,226 yuan per ton. Although the price movement was modest, its synchronization with domestic futures market weakness signals a clear short-term cost easing.
Cost Transmission: Linkage from Imported to Domestic Cotton
Imported cotton serves as a key supplement to China’s domestic cotton market, and its price fluctuations directly affect textile enterprises’ raw material procurement decisions. The decline in imported cotton quotes directly reduces procurement costs for foreign trade companies, creating substitution pressure on domestic cotton spot prices. On the same day, the Zhengzhou Commodity Exchange cotton futures contract (2609) closed at 15,930 yuan per ton, down 245 yuan from the previous session, with open interest decreasing by 34,680 lots. The synchronized weakening of futures and spot prices reflects bearish market expectations for short-term supply-demand dynamics.
From a supply chain perspective, there is a clear substitution effect between imported and domestic cotton. When imported cotton costs fall, textile enterprises tend to increase purchases of foreign cotton, reducing reliance on domestic supply and pushing domestic spot prices lower. This cost transmission mechanism was fully demonstrated in July 9 market data: the international cotton price index (M) fell 0.60 cents to 88.99 cents per pound, equivalent to a port delivery price of 14,907 yuan per ton, further widening the price gap between domestic and imported cotton.
Supply Chain Pressure: Ripple Effects on Lint and Yarn
The weakening of upstream raw material prices quickly transmits downstream to lint and cotton yarn. Lint, as an intermediate product after cotton ginning, is directly affected by cotton costs. After the decline in imported cotton quotes, the substitution effect put pressure on domestic lint spot prices, significantly weakening cost support. Industry data shows that the lint market also faced bearish pressure on July 9, with its multi-directional score dropping to -1, indicating cautious sentiment among market participants.
The transmission to cotton yarn is more moderate but cannot be ignored. Yarn prices are primarily influenced by upstream cotton and lint costs. The cost easing this time has created a mild bearish effect on yarn prices, with a multi-directional score of -0.5. This means that while yarn prices have not yet fallen sharply, the decline in raw material costs has begun to erode their price support foundation. For spinning enterprises, this implies potential margin compression, especially in the absence of significant improvement in downstream demand.
Notably, the decrease in open interest (34,680 lots) suggests capital is exiting the cotton futures market, often a precursor to continued short-term price pressure. The price discovery function of futures markets makes this signal forward-looking, and textile enterprises should closely monitor subsequent trends.