On July 9, import cotton prices at Chinese main ports edged lower, with the SM and M International Cotton Price Index dropping 0.61 cents/lb and 0.60 cents/lb, respectively. Converted under a 1% tariff and the latest central bank exchange rate, the port delivery prices settled at approximately 15,226 RMB/ton for SM grade and 14,907 RMB/ton for M grade. While the decline appears modest, its implications are far more significant against the current backdrop of a pressured global cotton textile chain.
Supply and Demand Dynamics Behind the Price Move
The immediate driver of this price adjustment stems from the international market. ICE cotton futures have been hovering at low levels, pressured by expectations of bumper harvests in major producing countries—the US, Brazil, and India—for the 2025/26 season. The latest USDA supply and demand report indicates global ending stocks are projected to climb to a five-year high, cementing a loose supply scenario. On the demand side, conditions remain lackluster: mill operating rates across Southeast Asia are generally low, and Chinese downstream orders are dominated by small, short-cycle runs, with bulk orders scarce.
Looking at the converted port delivery price, 15,226 RMB/ton for SM grade cotton narrows the gap with domestic Xinjiang cotton to roughly 200–300 RMB/ton. Previously, import cotton was consistently priced higher than domestic cotton due to elevated shipping costs. Now that the spread has nearly disappeared, import cotton has regained its cost appeal. For spinning mills that rely on high-grade cotton, this represents a cost-optimization window not to be overlooked.
The Exchange Rate Variable and Procurement Timing Game
It is worth noting that the exchange rate used in the price conversion is the PBOC midpoint rate, not the spot market rate. The RMB exchange rate is experiencing heightened two-way volatility. On July 9, the midpoint rate appreciated slightly from the previous trading day, but market consensus expects depreciation pressure in the second half of the year. If the RMB weakens subsequently, the actual procurement cost of import cotton will rise passively, meaning the current low price could be fleeting.
For textile mills with rigid import demand, this price correction offers a timing opportunity: they can lock in raw material costs at a relatively low level while hedging against future exchange rate uncertainty. However, large-scale stockpiling remains risky, as the sustainability of downstream grey fabric and apparel orders is still unclear, and inventory turnover risk persists.
Industry Transmission: Ripples from Cotton Prices to Fabric End-Markets
The decline in import cotton prices will cascade along the supply chain. The first beneficiaries are producers of high-count and combed yarns, which rely heavily on imported cotton, as cost reductions directly improve gross margins. Next, weaving sectors using significant amounts of imported cotton—such as denim and home textile fabrics—may gain room to adjust their quotations. However, end-brand apparel companies are still in a destocking cycle and have very low tolerance for upstream price increases. Therefore, the cost benefits from the cotton price decline will mostly be retained in intermediate processing stages rather than immediately passed on to consumer prices.
For traders in fabric hubs like Keqiao and Shengze, a wait-and-see approach with short-order operations is advisable. Do not blindly bottom-fish. Import cotton arrivals at ports continue to increase, and port inventories remain high, meaning supply is not tight, and a price rebound lacks strong support.