Reserve Cotton Transaction Prices Edge Down, Market Sentiment Remains Elevated

On July 21, China National Cotton Reserves Corporation offered 8,045.4550 tons of reserve cotton for sale through public listing, achieving a 100% transaction rate with an average price of 17,480.36 yuan/ton. Compared to the previous trading day, the average price edged down by 7.69 yuan/ton, equivalent to 18,078.16 yuan/ton for Grade 3128B cotton. This data indicates strong restocking demand from textile mills, but price negotiations are entering a delicate phase.

Transaction Structure: Imported Cotton Dominates

Imported cotton accounted for the majority of the day's transactions, with 6,904.1490 tons offered and fully sold at an average price of 17,518.81 yuan/ton, equivalent to 18,112.46 yuan/ton for Grade 3128B, with an average premium of 1,821.46 yuan/ton. In contrast, Xinjiang cotton saw only 1,141.3060 tons offered, with an average price of 17,247.74 yuan/ton, equivalent to 17,870.69 yuan/ton for Grade 3128B, and a premium of 1,579.69 yuan/ton. The premium for imported cotton was 242 yuan/ton higher than for Xinjiang cotton, indicating stronger market recognition of imported cotton quality, particularly for fiber length and strength. For textile enterprises, imported cotton still offers a clear cost-performance advantage for high-end yarn production.

Price Trend: What Does the Slight Dip Signal?

The average transaction price edged down from 17,488.05 yuan/ton on July 20 to 17,480.36 yuan/ton, a decrease of only 0.04%. However, combined with the sustained 100% transaction rate over multiple days, this slight adjustment does not reflect weakening demand but rather short-term price bargaining within the current range. Current reserve cotton prices are already about 500 yuan/ton above spot prices for the 2025/26 Xinjiang cotton crop. Enterprises are purchasing reserve cotton more to fulfill urgent orders or produce high-count yarns rather than for large-scale stockpiling. The highest transaction price for imported cotton reached 18,450 yuan/ton, while the lowest was 17,070 yuan/ton, a spread of 1,380 yuan/ton, reflecting quality differentiation among batches and reminding buyers to select carefully.

Industry Impact: Profit Pressure and Restocking Pace

For downstream textile mills, current cotton prices are near a three-year high, compounded by a lack of significant recovery in end-use garment orders. Corporate profit margins continue to be squeezed. The 100% transaction rate reflects that some enterprises are forced to replenish inventories at high prices due to low stock levels, while others remain on the sidelines, waiting for the policy side to release more reserve cotton or import quotas. Historically, when the reserve cotton transaction rate exceeds 95% for several consecutive days, the policy adjustment window often opens, possibly leading to increased listing volumes or adjusted bidding rules. The lower premium for Xinjiang cotton also suggests that inland mills still have concerns about transportation costs and quality stability.

Practical Recommendations

For Buyers - Monitor the release pace of reserve cotton. If the transaction rate remains at 100% and prices rise, consider increasing purchase batches to lock in costs. If prices decline consecutively, delay purchases to wait for lower points. - Given the higher premium for imported cotton, prioritize Xinjiang cotton for regular yarn production and reserve imported cotton for high-count yarns or export orders to maximize cost efficiency. - Align production schedules with reserve cotton delivery timelines to avoid line stoppages due to delayed pickup.

For Foreign Trade Enterprises - With the current spread between international cotton prices (ICE futures) and domestic reserve prices at about 1,000 yuan/ton, imported cotton remains competitive. Monitor the timing for using sliding-scale tariff quotas. - When signing export contracts with clients, consider using floating pricing or short-term price lock clauses to hedge against domestic cotton price volatility. - Watch capacity changes in Southeast Asian spinning sectors. If cotton prices in Vietnam and India rise simultaneously, the export competitiveness of Chinese cotton yarn may improve temporarily.