On July 9, imported cotton quotes at China's main ports experienced a slight decline, directly lowering raw material procurement costs for domestic textile mills. The International Cotton Price Index (SM grade) stood at 90.92 cents per pound, down 0.61 cents from the previous day, translating to a port delivery price of approximately 15,226 RMB per ton under the 1% tariff rate. On the same day, the M grade index fell to 88.99 cents per pound, equivalent to 14,907 RMB per ton. Although the move was modest, its signal significance cannot be overlooked amid the current delicate supply-demand balance.
Futures Market Reaction
The decline in imported cotton prices quickly transmitted to the domestic futures market. On July 9, the main Zhengzhou Commodity Exchange contract for September 2026 (2609) closed at 15,930 RMB per ton, down 245 RMB per ton from the previous session, a drop of about 1.5%. More notably, open interest for the contract decreased by 34,680 lots, indicating long positions were unwound and bearish sentiment had strengthened. The weak performance of futures further validated the logic of weakened cost support in the spot market.
From an industrial chain perspective, imported cotton and domestic lint cotton are direct substitutes. When foreign cotton quotes decline, mills tend to increase their share of imported cotton procurement, curbing demand for domestic cotton and putting downward pressure on domestic lint prices. Industry data shows that the price spread between domestic and imported cotton has narrowed to about 700 RMB per ton, nearly 200 RMB less than a month ago, highlighting the growing cost advantage of imported cotton.
Cotton Yarn Cost Support Weakens
The upstream price volatility is now transmitting to the midstream cotton yarn segment. Lower cotton and lint prices mean the cost support for cotton yarn is loosening. Although adjustments in yarn prices typically lag behind raw material moves, the cumulative bearish signals from upstream are expected to exert mild downward pressure on yarn quotes. For spinning mills, this implies further compression of short-term profit margins, especially against a backdrop of still-weak downstream orders.
Feedback from major textile clusters in Jiangsu and Shandong provinces indicates that mills have turned cautious in procurement, with some opting to digest existing inventories rather than chasing higher-priced replenishment. If this wait-and-see attitude persists, it may further delay the stabilization of cotton prices.
Practical Implications for Buyers and Exporters
In the current downward price channel, different market participants need differentiated strategies.
For Buyers - Temporarily slow down domestic cotton procurement and prioritize using import quotas to lock in lower costs, but remain vigilant about exchange rate risks. - Monitor support levels for the Zhengzhou cotton contract around 15,500-15,800 RMB per ton; consider building virtual inventory in batches if the level breaks. - Negotiate short-term floating price contracts with suppliers to partially transfer raw material cost volatility risks.
For Exporters - Lower imported cotton quotes benefit export-oriented companies. Use the current window to lock in raw material costs for forward orders and enhance price competitiveness. - Closely track arrival schedules and shipping changes for U.S. and Brazilian cotton to avoid port inventory buildup and further spot price declines from concentrated arrivals. - Include raw material price adjustment clauses in export contracts to hedge against profit erosion from narrowing domestic-import cotton spreads.
Overall, while the early-July drop in imported cotton prices is limited in magnitude, its chain reaction across the industry warrants continued monitoring. Key factors to watch include the USDA supply-demand report, domestic new crop growth conditions, and recovery progress in downstream textile and apparel export orders—these will collectively determine the cyclical bottom for cotton prices.