Long-staple cotton spot prices have shown unusual resilience during the industry's off-season. In early July, despite persistently weak sales of 60S and higher count yarns and falling mill quotes, Xinjiang long-staple cotton prices remained firm, with some mills even narrowing discounts for regular customers and large orders. This is not demand-driven but rather a temporary equilibrium created by supply-side holding sentiment and spinners' 'light inventory' strategy.
Supply Side: Hoarding and Structural Shortage
Feedback from ginning factories in Aksu, Bazhou and other major production areas indicates that 2025/26 machine-picked long-staple cotton inventory is highly concentrated. One large cotton trader has only 11 lots remaining, stored in an Aksu supervised warehouse, and requires large-scale textile mills to take delivery in bulk, showing little interest in small, scattered purchases. This hoarding mentality is directly reflected in prices: on July 8-9, 2024/25 long-staple cotton in Bazhou was quoted at 26,720-26,920 yuan/ton, while 2025/26 long-staple cotton in Aksu was quoted at 28,220 yuan/ton, little changed from late June.
Notably, the USDA estimates 2026/27 US Pima cotton planted area at 150,000 acres, up 6% year-on-year, compared to the March intentions report of only 130,000 acres. This expectation gap means that if Pima output increases as expected, it will pressure the global high-end long-staple market, though the short-term impact on domestic spot prices will take time to transmit.
Demand Side: Spinners' 'Light Inventory' Logic
Large-scale mills in Shandong, Jiangsu, and Henan report that inland long-staple cotton inventories are limited, concentrated in Zibo, Weifang, and Jiangyin. Facing a lack of sustained terminal orders and thin margins for high-count yarns, mills have compressed raw material stocks to minimum safety levels, purchasing only for immediate needs. To adapt, traders have adjusted sales strategies, allowing half-lot deliveries—contracts are still for one or several lots, but payment is made per delivery.
This 'lukewarm' trading state essentially reflects a price expectation divergence between upstream and downstream. Cotton enterprises believe high-quality long-staple resources are scarce and refuse to lower prices; spinners, facing weak downstream demand, are unwilling to take inventory risks from high-cost raw materials. Both sides are waiting for clearer market signals.
Industry Impact: How Will the Stalemate Break?
The current market pattern affects different chain segments differently:
- **Ginning factories and traders**: Benefit from firm prices short-term, but inventory accumulation ties up capital. If sales are slow before the new crop arrives, they may face concentrated selling pressure.
- **Spinners**: The 'light inventory' approach reduces capital occupation and price fall risk, but may miss opportunities for low-cost replenishment. Once orders recover, they will face higher raw material costs.
- **Exporters**: High-count yarn export quotes are supported by raw material costs, but international buyers have limited acceptance of high prices, increasing order transfer risk.
Historically, such stalemates are broken by: first, supply-side price cuts to clear inventory after new crop expectations become clear; second, unexpected downstream demand recovery forcing mill restocking. Given the USDA's upward revision of Pima acreage and the ongoing textile off-season, prices are likely to remain high and volatile short-term.