Reserve cotton auctions have maintained a 100% clearance rate for consecutive days, but the premium gap between imported and Xinjiang cotton is widening. On July 28, imported cotton traded at an average price 660 yuan/ton higher than Xinjiang cotton, with an average premium 576 yuan greater. This signal reflects a structural shortage of high-grade domestic cotton rather than short-term volatility.
Auction Data Analysis
China Reserve Cotton Management Co. offered 8,006.392 tonnes on July 28, all sold at an average price of 17,187.02 yuan/ton, down 88.31 yuan from July 27. The price converted to 3128B grade was 17,798.5 yuan/ton. The highest bid reached 17,980 yuan, the lowest 16,480 yuan, a spread of 1,500 yuan, indicating severe price divergence by quality.
Imported cotton averaged 17,383.85 yuan/ton, converted to 3128B at 17,970.49 yuan, with an average premium of 1,795.49 yuan. Xinjiang cotton averaged 16,724.88 yuan/ton, converted to 17,394.68 yuan, with a premium of 1,219.68 yuan. The premium gap of 576 yuan shows spinners' stronger bidding willingness for imported cotton.
Cumulative sales through July 28 reached 56,138.551 tonnes, all cleared. Industry data indicate this pace is significantly faster than the same period last year, reflecting high mill operating rates and low raw material inventories.
Industrial Impact and Transmission
The rising premium for imported cotton points to a supply gap in high-grade domestic cotton. Although Xinjiang cotton production is stable, limited batches meet high micronaire and length requirements. Spinners turning to imported cotton, especially U.S. and Brazilian, push up bidding costs.
This trend directly affects yarn markets. Costs for 32s and 40s carded yarn may shift upward, especially for premium grades using imported cotton. Fabric buyers should expect higher gray fabric quotes in the second half and monitor price movements of substitutes like viscose.
Regionally, spinning clusters in Shandong and Henan rely more on imported cotton, while Xinjiang-based mills use local cotton. The widening premium will exacerbate cost differences, giving Xinjiang mills a short-term advantage.
Policy and Market Outlook
Continued full clearance of reserve cotton indicates policy intervention has not yet eased supply tightness. With daily offerings around 8,000 tonnes, if volumes are not increased, competition for high-grade cotton may further lift premiums.
For exporters, rising imported cotton costs will squeeze profit margins on yarn exports. If the yuan exchange rate remains stable, the cost advantage of imported over domestic cotton is narrowing. Companies are advised to use futures to lock in raw material costs or shift product mix toward blends.