Reserve Cotton Sales Data Reveal: July Cotton Spinning Enterprises' Restocking Pace and Market Signals

From July 20 to 28, 2026, reserve cotton sales totaled 56,138.55 tons, involving 113 enterprises. This volume is unusual during the textile off-season, typically a period of slower procurement for cotton spinning mills. The transaction scale suggests that downstream restocking demand is being released ahead of schedule.

Transaction Structure: Small and Medium Enterprises Lead Restocking

Based on the number of winning bidders, the average transaction volume per enterprise is 496.8 tons, indicating a predominance of small and medium-sized cotton spinning firms. These companies often lack long-term price locking capabilities and rely on reserve cotton to hedge against spot market volatility. Industry public data shows that in the first half of 2026, Xinjiang cotton spot prices rose by approximately 8% year-on-year, while the reserve cotton auction base price remained relatively stable. This price gap has been a key driver for SMEs to participate.

Notably, the daily disclosure mechanism for winning bidders ensures transparency, allowing public supervision to prevent hoarding or reselling, thereby ensuring policy benefits reach real enterprises.

Policy and Market: The 'Stabilizer' Role of Reserve Cotton

According to the 2026 central reserve cotton sales announcement and bidding rules, this round of sales continues the policy orientation of 'ensuring supply and stabilizing prices.' Against the backdrop of limited cotton import quotas and increased volatility in international cotton prices, reserve cotton releases provide a crucial raw material supplement for domestic cotton spinning mills. China Cotton Information Network data shows that in the first three weeks of July, the main Zhengzhou Cotton futures contract fluctuated between 15,800 and 16,200 yuan per ton, while reserve cotton auction prices were typically 3%-5% below spot prices, directly reducing enterprises' cotton costs.

For industrial clusters, enterprises from Shandong, Henan, and Jiangsu provinces showed high participation. These small and medium-sized mills, facing slack orders during the off-season, prefer to lock in low-cost raw materials through reserve cotton to maintain operating rates and improve profit margins.

Upstream and Downstream Transmission: Potential Impacts on Cotton Yarn and Fabric Markets

The concentrated reserve cotton sales imply an increase in cotton yarn output over the next one to two months. Based on 56,138.55 tons of cotton, approximately 45,000-48,000 tons of cotton yarn can be produced (assuming a spinning loss factor of 1.15-1.2). This incremental capacity may exert downward price pressure on the downstream grey fabric and finished fabric markets, especially given that current terminal apparel orders have not yet shown significant recovery.

For fabric buyers, the expected looser supply of cotton yarn in the third quarter may create a procurement window. It is advisable to monitor cotton yarn price trends in August and September; if periodic price corrections occur, consider moderately increasing inventory.

Practical Recommendations

For Buyers - Focus on cotton yarn price changes in mid-to-late August; if prices decline due to increased reserve cotton supply, consider locking in raw material costs for autumn/winter fabric orders in advance. - Use reserve cotton transaction disclosure data to track downstream mills' operating rates, prioritizing suppliers with larger transaction volumes and good reputations.

For Foreign Trade Enterprises - Given that domestic cotton prices remain competitive relative to international prices, consider increasing flexibility in export quotations for cotton-containing fabrics to attract buyers from Southeast Asia, Europe, and the Americas. - Monitor the pace of subsequent reserve cotton releases; if transaction volumes continue to grow, it indicates easing supply tightness, allowing for adjustments in procurement cycles accordingly.