June's cotton market was caught in a tug-of-war between two opposing forces: the textile off-season's demand contraction and Xinjiang's heat-driven production loss expectations. Ultimately, demand pressure prevailed, pushing domestic prices lower by month-end, though a solid floor remained.
Domestic Spot Market: Three-Phase Volatility, Average Down 242 Yuan/Ton
The China Cotton Price Index (CC Index) traced a clear N-shaped trajectory in June: an early-month rally to 17,899 yuan/ton, a sharp drop to 17,336 yuan/ton on weak orders, a mid-month rebound to 17,632 yuan/ton supported by Xinjiang heat and inventory drawdowns, and a late-month retreat to 17,554 yuan/ton as finished goods stocks piled up and operating rates fell. The monthly average stood at 17,547 yuan/ton, down 242 yuan from May but still 2,729 yuan higher year-on-year. The intra-month swing of 563 yuan (3.2%) was wider than recent months, signaling intensified market disagreement. For buyers, this volatility complicates price locking and amplifies inventory risk.
Futures Market: Basis Narrows, Buying Weak
ZCE cotton futures traded in a 15,900-16,440 yuan/ton range with no clear trend. The main contract averaged 15,944 yuan/ton, down 313 yuan from May. The basis narrowed to 1,474 yuan/ton, 51 yuan tighter than the previous month. A narrowing basis typically signals weakening spot sentiment, potentially attracting hedging interest. Crucially, the overhang of state reserve sales continued to cap bullish momentum. If reserve sales materialize in H2, futures could face further downward pressure.
International Market: Wider Swings, Spread Widens to 3,179 Yuan
International cotton prices followed a similar but more violent pattern. ICE December fell from 81.58 to 75.17 cents/lb, averaging 77.77 cents/lb, down 4.46 cents from May. The FC Index M averaged 86.69 cents/lb, converting to 14,375 yuan/ton at month-end, 3,179 yuan below the CC Index—a spread expansion of 618 yuan from May.
Global catalysts were more numerous: India's temporary tariff removal briefly boosted demand expectations, but U.S. rainfall improved soil moisture, the dollar strengthened, Fed rate hike expectations rose, and the U.S.-Iran agreement depressed crude oil prices. El Niño's potential impact on Northern Hemisphere output provided a mid-month rally, but it could not reverse the downtrend. The widening spread makes imported cotton increasingly attractive for quota holders, though higher international volatility demands flexible hedging and FX management.
Chain Transmission: Large Mills Full, Small Mills Pile Up, Chemical Fiber Substitution Intensifies
June saw a clear bifurcation in the downstream textile sector. Large and medium-sized mills maintained full order books and high operating rates, while small mills faced scarce orders and inventory build-ups. This divergence reflects structural demand shifts: brand orders concentrate on large mills, leaving small mills exposed to spot market weakness.
Cotton yarn prices rose marginally in early June—32s combed yarn averaged 23,333 yuan/ton, up just 56 yuan (0.24%) month-on-month—but gave back gains in the second half as mills cut prices to destock. Polyester staple fiber ended at 7,250 yuan/ton, down 525 yuan; viscose staple fiber at 14,300 yuan/ton, up 200 yuan. Weaker chemical fiber prices strengthened substitution for cotton, especially in lower-count yarns.
Long-staple cotton trading was thin; Grade 137 averaged 26,930 yuan/ton, down 107 yuan. Mills bought strictly on order, avoiding inventory accumulation—a clear sign of cautious sentiment.