On July 13, imported cotton prices at China's main ports edged up, with the SM grade rising 0.89 cents/lb to 91.81 cents/lb and the M grade climbing 0.90 cents/lb to 89.89 cents/lb. Converted at a 1% tariff rate, the landed costs in RMB reached approximately 15,374/ton and 15,056/ton respectively. While the absolute increase is less than 1%, it breaks a two-week sideways trend and prompts a reassessment of cotton price dynamics.
Context: A Tentative Price Adjustment, Not a Trend Reversal
From a data perspective, both SM and M grade prices moved within a 1% band, a scale that typically does not trigger significant spot market reactions. However, the timing is noteworthy—occurring during the interlude between the Northern Hemisphere's old and new crop seasons, when international cotton merchants are wrapping up inventory destocking.
Industry data shows that global cotton ending stocks fell by about 4% in the first half of 2026, with export paces from major producers like India and Brazil slowing. After clearing previous inventory overhangs, merchants are now testing market demand with modest price hikes. This behavior reflects trade-level positioning rather than genuine end-consumer recovery.
Industry Impact: Cost Pressures and Divergent Procurement Strategies
For Chinese spinners, each 1 cent/lb increase in imported cotton adds roughly 160 RMB per ton to raw material costs. Following this adjustment, the landed cost of SM grade cotton has broken through the 15,300 RMB/ton threshold, while domestic 3128B grade cotton is trading around 15,200-15,400 RMB/ton. The price gap between domestic and imported cotton has effectively closed.
This means spinners no longer enjoy arbitrage opportunities between the two sources. For mills producing high-count or combed yarns, the fiber quality advantage of imported cotton keeps it a necessity; for those making commodity yarns, switching to domestic cotton becomes more attractive to avoid exchange rate and shipping uncertainties. Such divergent procurement behavior will intensify regional price spreads in the domestic spot market.
Downstream orders remain weak. The textile PMI new orders sub-index stayed below the 50 threshold for a third consecutive month in June, while inventories of grey fabrics and cotton yarns are higher than year-ago levels. The modest cost increase cannot be effectively passed through to finished goods, further squeezing processing margins. Some small and medium-sized mills have begun voluntary production cuts, reducing operating rates to around 70% to control stock risk.