In the final week of July, reserve cotton auctions continued to achieve a 100% turnover rate, but the price signals deserve more attention than the turnover itself. Public data from China National Cotton Reserves Corporation shows that on July 27, all 8,022 tons offered were sold, with an average price of 17,275 yuan/ton, up 58 yuan from the previous round on July 24. More critically, the price gap between imported and Xinjiang cotton widened from around 500 yuan to 531 yuan, with imported cotton premiums nearing 1,900 yuan. This indicates that downstream mills' pursuit of high-grade cotton has entered an intense phase—it's not simply a shortage of cotton, but a shortage of quality cotton.
Structural Divergence: Imported Cotton Premium Widens, Xinjiang Cotton Lags
On the day, imported cotton averaged 17,407 yuan/ton, translating to 18,072 yuan for Grade 3128B, with an average premium of 1,897 yuan. Xinjiang cotton averaged 16,876 yuan, translating to 17,557 yuan for Grade 3128B, with an average premium of 1,382 yuan. The 531-yuan gap expanded by about 30 yuan from the previous round. Imported cotton premiums were 515 yuan higher than Xinjiang cotton, directly pointing to a growing reliance on imported cotton among domestic textile mills, which are willing to pay higher premiums for quality stability and consistency.
Cumulatively, as of July 27, 48,132 tons of reserve cotton have been offered, all sold. The turnover rate has remained 100% for consecutive sessions, but the price center keeps shifting upward. If current momentum continues and August offerings do not increase significantly, price pressure will inevitably transmit downstream—spinning mills will face higher raw material costs, squeezing yarn profit margins.
Industrial Chain Impact: How High Premiums Affect Yarn and Fabric
The high turnover and premiums in reserve cotton auctions essentially serve as a thermometer for the upstream cotton spinning chain. The current average price of 17,275 yuan exceeds most mills' expected cost lines, especially for small and medium enterprises focusing on medium-to-low count yarns, where raw materials account for over 70% of costs. A 58-yuan increase per ton may seem modest, but its cumulative effect cannot be ignored.
More concerning is the persistent rise in imported cotton premiums. Imported cotton typically corresponds to high-count, combed yarns for premium products with relatively higher profit margins. But a premium of 1,897 yuan pushes raw material costs close to 18,000 yuan/ton. If downstream grey fabric and finished fabric prices cannot keep pace, spinning mills risk margin inversion—where the cost of flour exceeds the price of bread. Feedback from industrial clusters in Shandong and Henan indicates some mills have begun adjusting product mixes, reducing low-count yarn output and shifting toward blended and differentiated products.
Policy Signals and Market Expectations: Can Auction Pace Ease Structural Imbalance?
The core goal of reserve cotton auctions is to ensure supply and stabilize prices, but current trading patterns suggest price stabilization faces challenges. The widening gap between imported and Xinjiang cotton reflects lingering concerns about the quality consistency of Xinjiang cotton. While Xinjiang accounts for over 90% of national output, some batches still show variability in uniformity and micronaire, prompting large mills to favor imports.
With cumulative sales of 48,132 tons as of July 27, if August maintains a daily average of 8,000 tons, monthly supply would be around 170,000 tons—still insufficient to fully cover the domestic monthly cotton demand gap of approximately 600,000-700,000 tons. Market expectations for subsequent auction volumes and base prices will directly influence August price trends. If daily offerings cannot be raised above 10,000 tons, the average price may continue rising toward 17,500 yuan.