The fourth week of reserve cotton auctions saw no sign of cooling. On July 28, all 8,006 tonnes offered were sold at an average price of 17,187 yuan/ton, a slight drop of 88 yuan from the previous day but still marking a 100% clearance rate. More notably, the price gap between imported and Xinjiang cotton widened—imported lots averaged 17,384 yuan/ton versus 16,725 yuan for Xinjiang cotton, with a premium difference exceeding 500 yuan. This structural divergence signals a shift in downstream mills' fiber selection logic.
Quality Premium Divergence Intensifies
Imported cotton fetched an average premium of 1,795 yuan over the base price, while Xinjiang cotton's premium was only 1,220 yuan. The price spread, already present at the reserve floor, expanded further during actual bidding. Mills are clearly willing to pay extra for the fiber length and strength of imported cotton, while remaining cautious on Xinjiang lots.
This trend is no short-term blip. Cumulative auction volume of 56,138 tonnes has been fully absorbed with zero failures. Against a backdrop of generally tight spot market supply, the 100% clearance rate reflects two realities: first, domestic spinning capacity's raw material demand remains rigid; second, a structural shortage of high-grade cotton is worsening. The premium on imported cotton essentially prices in the domestic supply gap for superior grades.
Cost Pass-Through Chain Under Strain
With reserve cotton prices firmly above 17,000 yuan/ton and the 3128B equivalent approaching 17,800 yuan, the raw material cost share for 32s carded yarn has exceeded 70%, squeezing mill margins to multi-year lows. This pressure will not stop at spinning—fabric mills, dyers, and even apparel brands will gradually feel the upstream price hikes.
The core dilemma for cotton mills is that raw material costs are rising rigidly while downstream order prices have limited acceptance. Some small- and medium-sized spinners are already shifting product mix, reducing low-count yarn output in favor of high-count, high-density products to absorb costs. But this transition requires time and investment. In the short term, inventory management will be the key determinant of cash flow health.
Regional Industry Belt Reactions Diverge
Feedback from major cotton textile clusters shows the strongest buying appetite in traditional bases like Shandong and Henan, while mills in Jiangsu and Zhejiang lean toward wait-and-see. This divergence correlates with product structures—northern mills focus on pure cotton yarn, making them more sensitive to cotton prices; southern mills use more blended and synthetic fibers, allowing them to hedge against cotton volatility through formula adjustments.
In Xinjiang, despite generally normal crop growth this season, concerns over harvest quality persist. The lower premium on Xinjiang reserve lots reflects worries about consistency in domestic fiber specs. If the new crop fails to show marked quality improvement, imported cotton's premium advantage may widen further, reshaping procurement strategies for the 2026/27 season.