Weakening Imported Cotton Prices: Cost Support for the Cotton Textile Chain Softens

Imported cotton prices at major Chinese ports edged down on July 9, lowering the landed cost for buyers. While the decline appears modest, it has triggered price pressure across multiple links of the cotton textile chain, from raw materials to yarn, against a backdrop of already thin margins.

Background

The drop in foreign cotton quotes on July 9 was not an isolated event. On the same day, the main Zhengzhou Cotton Futures contract (2609) closed at 15,930 yuan/ton, down 245 yuan/ton from the previous session, a decline of about 1.5%. Open interest fell by 34,680 lots, suggesting that long positions were liquidated and bullish sentiment weakened. This simultaneous move in both spot and futures markets indicates that lower import costs are beginning to transmit into the domestic pricing system.

From a relative price perspective, the substitution effect between imported and domestic cotton is coming into play. As imported cotton becomes cheaper at the port, mills tend to increase their purchases of foreign cotton, directly competing with domestic lint cotton. Industry data shows that domestic lint cotton prices have already started to follow the downtrend, signaling a loosening of the cost-support logic.

Industry Impact

The weakening cost support is propagating downward along the supply chain. For lint cotton, lower import quotes mean a cheaper substitute is available, putting pressure on domestic spot inventories. The sentiment score for lint cotton has turned negative, reflecting broad expectations of near-term price weakness.

For cotton yarn, the impact is more indirect but still significant. With both cotton and lint cotton prices declining, the raw material cost support for yarn has softened. The sentiment score for cotton yarn is mildly negative, suggesting limited but clear downside risk. For spinners, lower raw material costs could be a positive, but if end-user orders do not recover in tandem, falling yarn prices will squeeze processing margins.

From a regional perspective, mills in major cotton-producing areas such as Xinjiang, Shandong, and Henan will feel the transmission first. If imported cotton arrivals continue to rise, the domestic supply glut will deepen, further pressuring local lint cotton spot prices.

Practical Recommendations

For Buyers - Temporarily slow down domestic cotton purchases and take advantage of the lower import cost window to compare prices and reduce raw material costs. - Monitor changes in Zhengzhou Cotton Futures open interest and spot basis. If open interest continues to decline, futures prices may fall further; consider building virtual inventory on far-month contracts.

For Spinners - Adjust cotton yarn quotes promptly in line with falling raw material costs to avoid losing orders due to lagging pricing. - Strengthen raw material inventory management, avoiding the accumulation of high-cost stocks during a price downtrend. Prioritize using imported or cheaper domestic cotton for production. - Keep a close watch on the recovery of downstream weaving and garment orders. If end demand does not improve simultaneously, yarn destocking pressure will increase, requiring proactive price adjustments or product switches.