Imported cotton prices saw a slight uptick on July 24, with the SM index rising to 91.56 cents per pound and the M index to 89.54 cents per pound. After applying the 1% tariff and the latest China Bank exchange rate, the landed cost at Chinese main ports reached 15,332 yuan per ton for SM grade and 14,998 yuan per ton for M grade. Although the absolute increase is modest—0.12 and 0.13 cents per pound respectively—the move signals that the cost floor for raw materials is firmer than the market had anticipated.
Cost Floor Hardens, Procurement Window Narrows
In absolute terms, the SM-grade cotton price rose only 0.12 cents per pound from the previous session, and M-grade edged up 0.13 cents, representing gains of roughly 0.1%. Yet when viewed in the context of the past three months, current prices sit near the middle of the trading range. More critically, the Chinese yuan depreciated slightly against the U.S. dollar over the same period, amplifying the actual cost increase when converted to yuan-denominated landed prices. For spinning mills that rely on imported cotton, this means raw material costs have risen by approximately 100 to 150 yuan per ton since the start of the month, directly squeezing already thin processing margins.
The pricing mechanism for imported cotton involves more than just the cents-per-pound quote. The real determinant for procurement decisions is the yuan-denominated factory-gate cost. Exchange rate fluctuations during this round of price increases have been underestimated—the movement in the China Bank midpoint rate makes actual import costs more sensitive than the nominal price change suggests. Mills that focus only on international quotes risk overlooking the hidden costs embedded in currency conversion.
Weak Downstream Orders Offset Procurement Appetite
In contrast to the uptick in raw material prices, downstream weaving and apparel orders have been recovering more slowly than expected. According to industry data, the operating rate of looms in the Jiangsu-Zhejiang region hovered around 65% in late July, below last year's level. End-brand customers remain in destocking mode, placing only small, just-in-time orders for yarn and grey fabric, with no long-term commitments in sight.
This "upstream rise, downstream weakness" dynamic puts spinning mills in a dilemma: if they don't replenish stocks, they risk missing further price increases; if they do replenish, they face inventory depreciation risk because finished product prices cannot rise in tandem. The current modest increase in imported cotton prices is more a reflection of international supply-demand fundamentals—particularly weather premiums in U.S. cotton-growing regions—than of end-demand recovery. This means the cost pass-through chain is broken; mills cannot easily transfer raw material cost increases to customers.
Regional Responses Diverge, Procurement Strategies Need Fine-Tuning
Different textile clusters are reacting differently to the price hike. In traditional cotton-spinning hubs like Shandong and Henan, where mills blend domestic and imported cotton, the elasticity to imported cotton price fluctuations is relatively high. Some companies have started adjusting their cotton mix, increasing the use of Xinjiang cotton. In contrast, regions like Jiangsu and Zhejiang, which focus on high-count and combed yarns, rely more heavily on imported cotton and are more cost-sensitive; their procurement pace has consequently slowed.
From a product category perspective, the impact of this price increase is concentrated in yarns of 40 counts and above, while the effect on low-count yarns is limited. Export-oriented companies need to pay special attention: if imported cotton prices continue to rise in August, orders that were hedged at earlier exchange rates could see their profit margins wiped out.