On July 21, China National Cotton Reserves Corporation completed another round of reserve cotton sales with a 100% transaction rate, but the average price edged down only 7.69 yuan/ton to 17,480.36 yuan/ton. This seemingly contradictory data—full absorption alongside a slight price dip—actually reveals the deep-seated dynamics of the current cotton-textile supply chain.
Transaction Structure: The Logic Behind Imported vs. Xinjiang Cotton Spread
Of the 8,045.455 tons offered, imported cotton accounted for 85.8% (6,904.149 tons), while Xinjiang cotton made up only 14.2% (1,141.306 tons). Imported cotton sold at an average of 17,518.81 yuan/ton, equivalent to 18,112.46 yuan/ton on a 3128B basis, with an average premium of 1,821.46 yuan/ton. Xinjiang cotton averaged 17,247.74 yuan/ton, equivalent to 17,870.69 yuan/ton on a 3128B basis, with an average premium of 1,579.69 yuan/ton. The spread of 271.07 yuan/ton indicates a clear premium for imported cotton.
This spread structure suggests two things: first, imported cotton remains favored by downstream mills for its quality or cost-effectiveness, especially given the current inversion of domestic and international cotton prices; second, the lower premium for Xinjiang cotton may reflect cautious purchasing due to supply chain compliance concerns or fluctuating willingness to use Xinjiang-origin fiber.
Price Trends: High-Volatility Stability and Buyer Expectations
The average price drop of 7.69 yuan/ton from the previous day is a technical fluctuation of only 0.04%. However, combined with recent reserve sales, the price has formed a narrow high-level range. For spinners, this means raw material costs are unlikely to fall sharply in the near term, but the momentum for further significant increases is also limited.
Looking at premiums, imported cotton averaged 1,821.46 yuan/ton above base, and Xinjiang cotton averaged 1,579.69 yuan/ton above base—both historically high levels. This reflects strong restocking demand but also rising price sensitivity. If prices continue to climb, some mills may shift to wait-and-see mode or substitute with alternative fibers.
Industry Impact: From Reserve Cotton to Fabric Cost Transmission
Reserve cotton prices directly affect raw material costs for cotton-textile mills, which then transmit to yarn, grey fabric, and finally finished fabrics. At the current 3128B equivalent of 18,078.16 yuan/ton, mill procurement costs are about 15-20% higher year-on-year. This cost increase, coupled with sluggish downstream apparel orders, is squeezing margins in midstream processing.
For weaving mills, high raw material costs combined with weak order books are pressuring operating rates. Some small and medium-sized mills have started reducing production of standard items and shifting to customized, high-value-added fabrics. This trend will further reshape cotton demand—high-count and combed yarn segments remain relatively stable, while low-count and open-end yarn demand may continue to shrink.