Cotton Imports Surge Nearly 300%: Chinese Textile Mills Rethink Inventory Strategy

June's 294.9% year-on-year surge in cotton imports is not a one-off spike but a signal of deep structural change in China's cotton market. The latest customs data has dropped a bombshell on the entire upstream textile sector.

The Logic Behind the Numbers

In June 2026, China imported about 110,000 tons of cotton, flat month-on-month but up 294.9% year-on-year. The first-half total reached 940,000 tons, up 102.2%. For the full 2025/26 season (September 2025 to June 2026), cumulative imports hit about 1.44 million tons, up 51.6%.

The flat month-on-month figure is telling: 110,000 tons has become the new normal baseline. A few years ago, this was peak-season volume; now it is the monthly average. This suggests the import surge is structural, not seasonal.

Three Drivers: Price Gap, Quotas, and Quality

First, the price gap between domestic and international cotton has widened significantly. In the first half of 2026, international prices were suppressed by global production surplus expectations, while domestic prices remained firm due to Xinjiang cotton consumption policies and low state reserves. When the gap exceeds RMB 1,500 per ton, mills' incentive to use imported cotton becomes overwhelming.

Second, quota issuance timing drove the spike. The 2026 sliding-duty quotas were released in Q2, with strict usage deadlines. Mills rushed to complete imports before quotas expired, explaining the sustained high volumes in May and June.

Third, product mix evolution is critical. High-count yarns, vortex-spun yarns, and other differentiated products increasingly require U.S. or Brazilian cotton for consistency. Domestic cotton's variability in micronaire and uniformity makes imported fiber essential for premium orders. U.S. and Brazilian cotton accounted for over 70% of first-half imports.

Industry Impact: The Cost-Inventory Dilemma

For mills, the flood of imported cotton is a double-edged sword. Short-term, raw material costs are controlled, especially for those who locked in basis and FX rates early. But long-term, sustained high imports mean port inventories are piling up. If downstream orders fail to keep pace, mills face the nightmare of full warehouses and unsold yarn.

For traders, the risk of price inversion is rising. While imported cotton is cheap now, if domestic consumer demand fails to recover in Q3, carrying costs—interest, storage—will eat up all the price spread profits.

Practical Advice

For Buyers - Monitor July-August arrivals. If port inventories break 800,000 tons, spot pricing power will shift to buyers. Consider slowing purchases. - When using imported cotton, always request batch consistency reports. Low-grade foreign cotton mixed into high-grade orders can cause yarn strength issues. Request HVI retesting for each batch. - If the RMB exchange rate shows one-way volatility, lock in import costs via forward FX contracts to avoid losing the price spread to currency fluctuations.

For Mills - Allocate imported cotton to high-count, compact-spun products that demand consistency. Use domestic cotton for commodity 32s and 40s yarns. - Use the current price gap window to execute forward point-fixed purchases for Q3 orders. If ICE futures break below 70 cents/lb, consider building virtual inventory on the exchange. - Control finished goods inventory turnover. With massive imported cotton arrivals, the yarn market may see temporary oversupply. Keep finished stock under 20 days.