In June, the monthly average of the China Cotton Price Index stood at 17,547 yuan/ton, down 242 yuan/ton month-on-month, yet still 2,729 yuan/ton higher year-on-year. More striking was the domestic-international price gap: the FC Index M averaged 86.69 cents/lb, translating to 14,375 yuan/ton at 1% tariff, 3,179 yuan/ton below domestic spot, with the spread widening 618 yuan from May to a new yearly high. The signal is clear: domestic cotton is now at a significant premium, eroding the cost competitiveness of Chinese textile mills.
Weak Demand Dominates, But Supply Expectations Provide Floor
June's price trajectory followed a classic "off-season" pattern. After a brief spike to 17,899 yuan/ton early in the month, prices quickly fell to 17,336 yuan/ton as mills curtailed restocking due to insufficient new orders. A mid-month rebound faded, closing at 17,554 yuan/ton. Downstream weakness was the primary driver: 32s pure cotton yarn prices edged up only 0.24%, and mills began offering discounts in the second half. Polyester staple fiber fell 525 yuan/ton by month-end, strengthening substitution pressure. Declining operating rates and rising finished goods inventories signaled a typical destocking phase.
However, cotton prices avoided a freefall thanks to supply-side expectations. Persistent high heat in Xinjiang raised crop loss concerns, and tight commercial inventories at season-end provided a floor. This "weak demand, tight supply" dynamic lent resilience to prices, preventing a one-sided decline.
Global Cotton Volatility Wider, Price Gap Reshapes Import Dynamics
International cotton fell more sharply in June, with ICE front-month averaging 77.77 cents/lb, down 4.46 cents/lb month-on-month. The decline was driven by multiple bearish factors: India's temporary tariff exemption was quickly offset by improved U.S. rainfall, a stronger dollar, and weaker export prospects. A mid-month bounce from USDA's global ending stock cut was short-lived, as macro headwinds (U.S.-Iran deal, Fed rate hike expectations, falling crude oil) resurfaced.
The widening price gap to 3,179 yuan/ton gives imported cotton a clear cost advantage. Mills with import quotas are likely to shift sourcing, while domestic spot liquidity may weaken further. For mills relying on domestic supply, cost pressure intensifies during the off-season.
Futures Lack Direction, Basis Narrows Reflects Caution
ZCE futures traded in a 15,900-16,440 yuan/ton range in June, with the front-month averaging 15,944 yuan/ton, down 313 yuan/ton. The basis narrowed to 1,474 yuan/ton, indicating market uncertainty. Buying interest was capped by expectations of state reserve releases, even without an official announcement.
Long-staple cotton saw thin trading, with 137-grade averaging 26,930 yuan/ton, down just 107 yuan/ton, but its premium over fine-staple narrowed by 485 yuan, suggesting shrinking room for high-end varieties.