On July 27, China National Cotton Reserves Corporation sold all 8,022 tons of reserve cotton offered, achieving a 100% transaction rate at an average price of 17,275 yuan/ton, up 58 yuan from the previous session. Cumulative sales have exceeded 48,000 tons with full clearance for multiple consecutive days. This data underscores the intensifying supply-demand imbalance in the upstream textile raw material market.
Supply-Demand Gap Widens
By transaction structure, imported cotton averaged 17,407 yuan/ton, equivalent to 18,072 yuan/ton on a 3128B basis, with an average premium of 1,897 yuan/ton. Xinjiang cotton averaged 16,876 yuan/ton, equivalent to 17,557 yuan/ton on a 3128B basis, with a premium of 1,382 yuan/ton. The price gap between imported and Xinjiang cotton exceeds 500 yuan/ton, reflecting the market's preference for higher-grade imported cotton. This structural premium suggests textile mills prioritize stable quality to meet downstream product consistency requirements.
The 100% cumulative transaction rate masks the reality of declining raw material inventories among textile mills. National Bureau of Statistics data shows that industrial cotton inventories in the first half of 2026 fell about 12% year-on-year, while yarn output grew over 5%. This gap is forcing mills to turn to reserve cotton auctions, even at prices above the spot market.
Industrial Logic Behind Bidding Heat
The intense bidding for reserve cotton is not an isolated event but a key node in the upstream-downstream transmission chain. Upstream, Xinjiang cotton production in the 2025/26 season fell about 8% year-on-year due to reduced planting area and weather impacts, creating a domestic supply gap. Downstream, textile and apparel export orders showed signs of recovery in the second quarter, especially to Southeast Asia and the Middle East, directly boosting demand for cotton yarn and grey fabrics.
From a price elasticity perspective, the current premium of nearly 1,900 yuan/ton for imported cotton means bidding mills accept an almost 8% premium to secure supply. This judgment is based on the observation that when premiums exceed 1,500 yuan/ton, the market is typically in a supply shortage. For buyers, the stable supply and quality assurance of reserve cotton make it an important tool to hedge against spot price volatility.
Regional Industrial Cluster Divergence
Different industrial clusters show varying responses to reserve cotton auctions. Home textile clusters in Nantong, Jiangsu, show strong demand for high-grade imported cotton, with local mills actively participating and favoring imported resources. In contrast, cotton spinning enterprises in Shandong and Henan focus more on the cost-effectiveness of Xinjiang cotton, with relatively conservative bidding premiums.
This divergence is also reflected in regional operating rates. According to industry data, as of late July, mill operating rates in Jiangsu and Zhejiang were around 75%, while central and western regions were only about 60%. Mills in the east, with higher operating rates, consume raw materials faster and have more urgent restocking needs, thus willing to pay higher premiums.
Short-Term Price Outlook and Risk Warnings
Based on current supply-demand dynamics, reserve cotton transaction prices are likely to remain in the 17,000-17,800 yuan/ton range in the short term. However, two potential risks should be monitored: first, if international cotton prices fall due to bumper harvest expectations in major producing countries, the premium for imported cotton may narrow; second, if downstream orders seasonally decline in the fourth quarter, restocking willingness may weaken.
For textile mills, now is not the time to chase high prices aggressively. A phased procurement strategy combined with forward contracts to lock in part of the raw material cost is recommended. Also, attention should be paid to the transportation pace of Xinjiang cotton to avoid delays due to logistics bottlenecks.