Reserve Cotton Sales Continue at Full Capacity: Why Are Textile Mills Still Keen on Stockpiling?

On July 24, reserve cotton listings of 8,036.6 tons were fully sold at an average price of 17,217 yuan/ton, down 199.58 yuan from the previous day. This marks consecutive days of 100% turnover since the reserve sales began. Cumulative listings have reached 40,109.85 tons, all fully traded.

Structural Signals from Transaction Data

On the day, imported cotton averaged 17,383.55 yuan/ton, with a premium of 1,663.84 yuan against the 3128B benchmark. Xinjiang cotton averaged 16,854.56 yuan/ton, with a premium of 1,251.99 yuan. The 412-yuan premium gap indicates stronger preference for imported cotton among mills.

This preference stems from the domestic-foreign price spread. Imported cotton offers superior quality consistency, especially for high-count yarn production. The premium difference also suggests that while Xinjiang cotton dominates in volume, its substitutability in premium spinning segments still has room for improvement.

The Logic Behind Price Decline and Strong Demand

The average price fell nearly 200 yuan from the 23rd, yet the turnover rate remained 100%. This apparent contradiction has rational explanations. First, reserve cotton prices are still below comparable spot market grades, making them attractive despite the dip. Second, mills generally hold low raw material inventories—urgent restocking needs cannot be postponed even if new orders are modest. Third, the assured quality and efficient release of reserve cotton encourage mills to purchase within the policy window.

Price ranged from 16,660 to 18,270 yuan/ton, a spread of 1,610 yuan, reflecting clear quality-based pricing divergence. Lower-grade cotton faces greater downward pressure, while high-grade lots retain premiums.

Policy Pace and Market Expectations

As of July 24, total reserve listings barely exceeded 40,000 tons, modest compared to previous years. At the current daily rate of ~8,000 tons, weekly supply is ~40,000 tons, monthly ~160,000-170,000 tons. This pace has limited marginal impact on market supply-demand balance but helps stabilize expectations.

For downstream weaving and garment manufacturers, short-term cotton price stability aids in order cost calculations. However, if international cotton prices continue to strengthen, the price advantage of domestic reserve cotton may narrow, potentially cooling buying enthusiasm. Additionally, weather conditions in Xinjiang and logistics remain variables to watch in the second half.

Practical Recommendations

For Buyers - Monitor the premium gap between imported and Xinjiang cotton; if it exceeds 500 yuan, consider increasing Xinjiang cotton allocation to reduce costs. - Given reserve prices are below spot levels, purchase in batches during the policy window to avoid chasing highs. - Check quality inspection reports before purchasing, especially fiber length and breaking tenacity.

For Textile Mills - Mills producing high-count yarns should prioritize imported reserve cotton; low-count yarn producers can lean on Xinjiang cotton for cost control. - Increase raw material inventory from the current 15-20 days to about 30 days to hedge against potential supply disruptions in H2. - Monitor policy adjustments before the new crop arrives in September and prepare procurement contingency plans.