Reserve cotton auctions entered their second week with sustained high trading activity, but price signals have begun to shift. On July 28, all 8,006 tons of offered reserve cotton were sold, marking the ninth consecutive session with a 100% turnover rate. However, the average transaction price fell 88 yuan/ton to 17,187 yuan/ton, while the price converted to the 3128 standard grade dropped 145 yuan/ton to 17,799 yuan/ton. These figures indicate that while textile mills remain eager to replenish inventories, their capacity to absorb high prices is weakening at the margin.
Xinjiang vs. Imported Cotton: Diverging Price Curves
A breakdown by variety reveals clear divergence. Xinjiang cotton averaged 16,725 yuan/ton, down 151 yuan/ton from the previous day, with an average premium of only 1,220 yuan/ton. In contrast, imported cotton averaged 17,384 yuan/ton, down just 23 yuan/ton, but commanded an average premium of 1,795 yuan/ton. The spread between the two widened from less than 500 yuan/ton to nearly 660 yuan/ton.
This divergence is not accidental. The higher premium for imported cotton reflects sustained rigid demand for high-grade, uniform-quality foreign fiber. With domestic and international cotton prices inverted and import quotas limited, reserve imported cotton has become the only channel for many mills to secure premium raw materials. The rapid decline in Xinjiang cotton prices, meanwhile, suggests ample domestic supply and potentially completed procurement by some mills in earlier rounds.
Cumulative Volume of 56,138 Tons: Concerns Behind Full Turnover
Since the start of this round of auctions on July 20, cumulative sales have reached 56,138 tons, with a 100% turnover rate throughout. On the surface, this signals strong market absorption capacity. But a closer look at price trends shows the average transaction price has fallen from above 17,300 yuan/ton in the first week to 17,187 yuan/ton, and the 3128 equivalent has dropped from over 18,000 yuan/ton to 17,799 yuan/ton. If prices continue to decline, some mills may adopt a wait-and-see stance, potentially leading to failed auctions in subsequent sessions.
For textile mills, the challenge is not just raw material price volatility but also uncertainty in end-demand orders. Cotton yarn prices are struggling to keep pace, gray fabric inventories are building, and downstream weaving mill operating rates have not improved significantly. The decline in reserve cotton prices is, to some extent, a reflection of profit distribution imbalances along the supply chain—upstream cotton prices remain firm, midstream spinning margins are squeezed, and downstream orders are weak in both volume and price.
Regional Implications: Pressure on Xinjiang and Dependence on Imports
The rapid decline in Xinjiang cotton auction prices will directly impact expectations for the upcoming seed cotton harvest in Xinjiang. While the new crop is in a critical growth phase, futures prices are already below reserve auction levels, and market expectations for the opening purchase price are being revised downward. For ginning mills in southern and northern Xinjiang, if reserve prices continue to fall, hedging opportunities for the new crop will narrow further.
The high premium for imported cotton underscores the structural dependence of domestic textile mills on high-quality foreign fiber. Although the state releases imported cotton through auctions, each tranche is limited, keeping premiums elevated. For mills producing high-count yarns and premium fabrics, imported cotton remains an irreplaceable input. This dependence is unlikely to change in the near term, and imported cotton auction prices are expected to remain relatively strong.