China's cotton market experienced a typical off-season pattern in June: prices oscillated amid weak supply and demand, ultimately closing slightly lower. The China Cotton Price Index averaged 17,547 yuan per ton, down 242 yuan month-on-month but up 2,729 yuan year-on-year. The tug-of-war was between sluggish off-season demand and production-cut expectations triggered by high temperatures in Xinjiang.
Domestic Market: Three Turns, Off-Season Suppresses Upside
Domestic spot prices went through three phases in June. Early in the month, the index briefly rose to 17,899 yuan/ton, but quickly fell back to 17,336 yuan/ton by June 12 as mills showed little appetite for replenishing raw materials. In mid-June, persistent high temperatures in Xinjiang, combined with declining commercial inventories, provided support, pushing the index back to 17,632 yuan/ton on June 22. However, in late June, rising finished goods inventories, declining operating rates, and lower crude oil prices (which made chemical fibers more competitive) weighed on demand, and the index fell to 17,554 yuan/ton by month's end.
The futures market moved in sync with spot prices but with greater volatility. The average settlement price for the main ZCE cotton contract was 15,944 yuan/ton, down 313 yuan month-on-month but up 2,442 yuan year-on-year. The contract peaked at 16,440 yuan/ton and bottomed at 15,900 yuan/ton, a maximum decline of 5.2%. Expectations of state reserve sales continued to dampen buying interest, with the spot-futures spread narrowing to 1,474 yuan/ton.
Long-staple cotton remained subdued. The 137-grade long-staple cotton averaged 26,930 yuan/ton, down 107 yuan month-on-month but still 4,280 yuan higher year-on-year. Mills maintained a hand-to-mouth procurement strategy, keeping prices tracking the trends of regular cotton and futures.
International Market: Wider Swings, Widening Price Gap
International cotton prices fell in June, following a similar pattern to domestic markets but with more pronounced volatility. Early in the month, India's suspension of cotton import tariffs briefly boosted demand expectations, but rains in U.S. cotton regions improved soil moisture, reducing yield loss risks. This, combined with proposed new U.S. tariffs and a stronger dollar, pulled the ICE main contract from 81.58 cents/lb to 75.17 cents/lb. Mid-month, the USDA's WASDE report lowered global ending stocks for the new season, and the strengthening El Niño raised concerns about Northern Hemisphere production, pushing ICE back to 80.47 cents/lb. At month-end, a U.S.-Iran deal drove crude oil prices lower, Fed rate hike expectations intensified, and U.S. cotton region drought continued to ease, dragging international prices down again.
The FC Index M averaged 86.69 cents/lb in June, down 6.79% month-on-month. At the end of the month, the 1% tariff-converted price was 14,375 yuan/ton, or 3,179 yuan below the domestic index—the widest gap in recent months. This made imported cotton increasingly cost-competitive, adding pressure on domestic prices.
Downstream: Mills Diverge, Yarn Prices Barely Rise
The off-season was evident in June. New orders contracted overall, but mills showed divergence: large and medium-sized mills were mostly fully booked, while small mills saw sparse orders and rising inventories. Cotton yarn prices rose in the first half of the month, improving margins, but fell slightly in the second half as mills offered discounts to clear stock. The 32-count pure cotton yarn averaged 23,333 yuan/ton, up only 56 yuan, or 0.24% month-on-month, but 14.83% higher year-on-year.
Chemical fiber prices moved in opposite directions: polyester staple fiber ended the month at 7,250 yuan/ton, down 525 yuan, while viscose staple fiber rose to 14,300 yuan/ton, up 200 yuan. Lower crude oil prices weakened cost support for polyester, while tight supply boosted viscose prices.
Outlook: Off-Season Continues, Watch Weather and Policy
Looking into July, the off-season is expected to persist. Weak orders and rising inventories will likely cap any significant price rally. However, the actual impact of Xinjiang's heat on yields, the pace of state reserve sales, and changes in the global macro environment could all break the current range-bound pattern.