On July 9, imported cotton prices at Chinese main ports posted a modest decline. The International Cotton Price Index (SM) stood at 90.92 cents/lb, down 0.61 cents from the previous session, while the (M) index was at 88.99 cents/lb, down 0.60 cents. Converted at the 1% tariff rate and the Bank of China central parity, the general trade landed price for SM grade cotton was approximately 15,226 RMB/ton, and for M grade about 14,907 RMB/ton.
Though the drop is small, the signal is not trivial. After a period of consecutive gains, the softening of imported cotton prices suggests the market is recalibrating its short-term supply-demand expectations.
Supply-Demand Balance: Global Production Growth Caps Upside
The core logic behind current pressure on international cotton prices lies in supply expansion expectations. Major Northern Hemisphere producers—the U.S., India, and Brazil—have all increased their planted acreage for the new season. Favorable weather in the U.S. Southwest cotton region has reinforced market optimism for 2026/27 global production. Meanwhile, end-user consumption has not expanded at the same pace. Global textile and apparel retail markets are still digesting previous inventories, with cautious procurement pacing.
This "supply up, demand steady" scenario is directly reflected in the futures market. The ICE cotton futures contract has been oscillating in the 85-92 cents/lb range, lacking a clear breakout catalyst. Cash indices follow suit, and the synchronized decline of the SM and M indices is a normal transmission of futures-cash linkage.
For Chinese textile mills, the price decline offers a temporary relief in raw material costs. However, current prices remain in the mid-to-high range of the past three years, and no trend reversal compared to the same period in 2025 is evident.
Exchange Rates and Tariffs: Hidden Cost Variables
The conversion in this quotation explicitly uses the Bank of China central parity rate, highlighting a key point: the actual landed cost of imported cotton depends not only on the U.S. cent quote but also on RMB exchange rate movements and tariff policies.
- If the RMB depreciates against the U.S. dollar, even if the cotton quote remains unchanged, the actual RMB cost paid by mills will rise.
- The cost difference between imports under the 1% tariff quota and those under the sliding-quota is significant. Enterprises must calculate precisely based on their quota availability.
Currently, the RMB is in a two-way fluctuation range with no clear unilateral trend. Given the direction of Fed monetary policy and Sino-U.S. interest rate differentials, exchange rate risk remains non-negligible.
Regional and Grade Dynamics: Port Arrival Pace and Quality Spread
China's main ports—Qingdao, Zhangjiagang, Shanghai—are the primary hubs for imported cotton. Does the price decline indicate rising port inventory pressure? According to industry data, as of early July, major port inventories were at moderate levels, with no obvious accumulation. However, the price spread between grades is narrowing. The SM-M spread has shrunk from 2.0 cents/lb at the start of the month to 1.93 cents/lb, suggesting a weakening premium for high-grade cotton.
For mills spinning high-count yarns, SM grade remains a necessity. For those producing medium-to-low count yarns, M grade and below offer better cost efficiency.