In June, the domestic cotton market experienced repeated fluctuations under the dual pressure of weak off-season demand and expectations of reduced yields due to high temperatures in Xinjiang. The China Cotton Price Index (CC Index) averaged 17,547 yuan/ton for the month, down 242 yuan/ton month-on-month and up 2,729 yuan/ton year-on-year. Meanwhile, international cotton prices fell more sharply, widening the domestic-international price gap to 3,179 yuan/ton, making imported cotton more cost-advantageous. This data indicates that downward pressure on cotton prices is primarily driven by demand, but supply-side weather disruptions are providing bottom support.
Three Phases of Price Fluctuation: Weak Demand Always Suppresses Rebound
Domestic spot prices went through three distinct phases in June. At the beginning of the month, driven by external markets and tight inventory expectations, the CC Index briefly rose to 17,899 yuan/ton. However, it was quickly dampened by insufficient orders during the traditional textile off-season. With low willingness to replenish raw materials, prices fell back to 17,336 yuan/ton by June 12. In mid-June, persistent high temperatures in Xinjiang threatened cotton growth, combined with continued destocking of domestic commercial inventories, sparking expectations of tight supply at the end of the season. Prices rebounded to 17,632 yuan/ton on June 22. But in late June, rising finished product inventories, declining operating rates among textile enterprises, and falling crude oil prices strengthening the substitution effect of chemical fibers led to further contraction in downstream procurement. Prices ultimately fell to 17,554 yuan/ton by the end of the month.
This price trajectory clearly reveals the core contradiction in the current market: weak demand is the dominant force suppressing price increases, while supply-side factors like weather and inventory can only provide temporary support and cannot drive a sustained uptrend. For buyers, this means that before the off-season ends, cotton prices are likely to remain range-bound, and chasing rallies is not advisable.
Futures Market and Basis: Intensified Expectation Games, Weak Market Confidence
Zhengzhou Commodity Exchange (ZCE) cotton futures fluctuated throughout June, with the main contract trading in a range of 15,900-16,440 yuan/ton, a maximum amplitude of 5.2%. The market was persistently suppressed by expectations of state reserve releases, resulting in weak buying momentum. At the end of the month, the main contract settled at 16,080 yuan/ton, 1,474 yuan/ton below spot prices, with the basis narrowing by 51 yuan/ton month-on-month. The average settlement price of the main contract was 15,944 yuan/ton, down 313 yuan/ton month-on-month.
The fact that futures prices are below spot prices and the basis is narrowing indicates that market expectations for the future are bearish. The "sword of Damocles" of state reserve releases has hung over the market, curbing speculative buying. Meanwhile, downstream yarn prices only rose slightly, with 32-count pure cotton yarn averaging 23,333 yuan/ton in June, up only 56 yuan/ton month-on-month, a gain of 0.24%. Enterprise profit improvements were limited and could not effectively pass through to the raw material end.
International Market: Multiple Bearish Factors Resonate, Domestic-International Spread Widens
International cotton prices moved largely in sync with domestic prices in June, but with significantly greater volatility. At the start of the month, India's temporary cancellation of cotton import tariffs briefly boosted demand expectations, pushing the ICE main contract to 81.58 cents/pound. However, a series of bearish factors—including improved soil moisture from rainfall in US cotton regions, the US's proposed new tariffs, and a stronger dollar—converged, driving prices down to 75.17 cents/pound. In mid-June, the USDA supply-demand report lowered global ending stocks for the new season, coupled with intensifying El Niño conditions raising concerns about Northern Hemisphere cotton production, leading to a rebound to 80.47 cents/pound. At the end of the month, the US-Iran agreement pushed crude oil prices lower, expectations of a Fed rate hike strengthened, and drought conditions in US cotton regions continued to ease, sending prices back to around 75 cents/pound.
The China Import Cotton Price Index (FC Index M) averaged 86.69 cents/pound in June, down 6.79% month-on-month. At the end of the month, the price converted to 14,375 yuan/ton under a 1% tariff, 3,179 yuan/ton below the domestic CC Index, with the domestic-international spread widening by 618 yuan/ton month-on-month. This spread level means that imported cotton has become significantly more attractive to domestic textile enterprises, especially those sensitive to profit margins. They may accelerate their shift toward imported cotton, further suppressing domestic cotton prices.
Industry Chain Transmission: Diverging Orders, Inventory Pressure Accumulates Midstream
June's textile market was characterized by the off-season, with overall new orders contracting but divergence among enterprises intensifying. Large and medium-sized textile enterprises generally had full order books, while small enterprises had scarce orders and saw finished product inventory build-up. Cotton yarn prices rose in the first half of the month in line with cotton prices, improving enterprise profits. However, in the second half, enterprises began offering discounts to destock, leading to a slight decline in yarn prices. Polyester staple fiber ended the month at 7,250 yuan/ton, down 525 yuan/ton, while viscose staple fiber ended at 14,300 yuan/ton, up 200 yuan/ton. The substitution effect of chemical fibers for cotton continued to ferment during the off-season, further weakening the upward momentum of cotton prices.
From an industry chain perspective, pressure is currently transmitting from the end-user to upstream. Textile enterprises have adopted a conservative raw material procurement strategy, mainly purchasing according to orders and avoiding inventory accumulation. The market for long-staple cotton was also sluggish, with the 137-grade long-staple cotton averaging 26,930 yuan/ton, down 107 yuan/ton month-on-month. This "destocking, risk-reducing" operational mode is unlikely to change in the short term.