On July 9, import cotton prices at China's main ports edged down, directly lowering import costs. The International Cotton Price Index (SM) dropped to 90.92 cents per pound, translating to a general trade port delivery price of about 15,226 yuan per ton (at 1% tariff). The M-level index also fell to 88.99 cents per pound, with a delivery price of 14,907 yuan per ton. This narrowing of the price gap between imported and domestic cotton puts direct pressure on the domestic spot market.
Market Linkages: Dual Pressure on Futures and Spot
The decline in import cotton costs is not an isolated event. On the same day, the main cotton futures contract (2609) on the Zhengzhou Commodity Exchange closed at 15,930 yuan per ton, down 245 yuan from the previous session, with open interest decreasing by 34,680 lots. The weak futures performance reflects market pessimism about future prices. Bearish sentiment is spreading: both cotton and lint cotton received a -1 score, while cotton yarn scored -0.5, indicating that upstream price weakness is transmitting downstream, weakening cost support for lint cotton and squeezing margins for yarn spinners facing dual pressure from raw material costs and sluggish demand.
Industry Impact: Cost Transmission and Competitive Landscape
The drop in import cotton prices directly lowers costs, removing a key support for domestic spot prices. For textile mills, the substitution effect between imported and domestic cotton becomes more pronounced: when imports are cheaper, buyers shift toward them, further depressing domestic prices. This price transmission mechanism will intensify competition in the short term, particularly pressuring Xinjiang cotton-growing regions. Meanwhile, the weakening cost support for cotton yarn means spinners may see profit margins shrink, forcing some small and medium enterprises to cut output or adjust raw material sourcing.