In the final trading week of July, reserve cotton auctions remained highly competitive. On July 28, all 8,006 tons offered were sold at an average price of 17,187 yuan/ton, equivalent to 17,799 yuan/ton for the 3128B benchmark. Although the price dropped 88 yuan from the previous day, the 100% transaction rate for consecutive days indicates resilient market absorption capacity.
Imported Cotton Premium Widens
A notable divergence emerged between imported and Xinjiang cotton. Imported cotton averaged 17,384 yuan/ton at auction, with an average premium of 1,795 yuan/ton over the 3128B price, while Xinjiang cotton averaged 16,725 yuan/ton with a premium of only 1,220 yuan/ton. The gap of nearly 575 yuan/ton underscores mills' rigid demand for higher-grade imported fiber.
This divergence is not accidental. Since the start of reserve sales, imported cotton has consistently commanded higher premiums due to its superior length and strength, which are critical for spinning fine-count yarns and fulfilling export orders. Buyers are willing to pay more for quality that directly enhances product competitiveness.
Full Subscription Reflects Persistent Supply-Demand Gap
As of July 28, cumulative reserve sales reached 56,138.551 tons, all fully subscribed. While this volume could cover half a year's consumption for a medium-sized mill, it represents only about 7% of China's annual cotton consumption of 800 million tons. The gap between supply and demand remains significant.
Participating mills are concentrated in Shandong, Jiangsu, and Henan provinces, where operating rates exceed 70% and inventory levels hover around 20-30 days. Despite prices above spot levels, reserve cotton offers stable quality and reliable delivery, making it a preferred channel for mills seeking supply certainty.
Downstream Pressure: Yarn Prices Lag, Margins Squeezed
Despite rising raw material costs, yarn prices have struggled to keep pace. As of late July, 32-count pure cotton yarn traded in a narrow range of 23,500-24,000 yuan/ton, with gains trailing cotton prices. This divergence is squeezing mill margins.
- Large mills rely on reserve cotton to lock in costs, while smaller mills adopt hand-to-mouth purchasing
- High imported cotton premiums disproportionately affect mills with higher foreign fiber usage
- Export orders face a Christmas restocking window, but overseas buyers resist price increases