Imported Cotton Prices Edge Up: Short-Term Balance Between Cost Pass-Through and Downstream Bargaining

In late July, the imported cotton market saw a slight rebound. On July 28, quotes at Chinese main ports ended a two-day decline, edging up. The international cotton price index (SM grade) rose by 0.92 cents to 91.23 cents per pound, while the M grade index also increased by 0.92 cents to 89.22 cents per pound. Converted at a 1% tariff rate, the corresponding port delivery prices were 15,278 yuan/ton and 14,945 yuan/ton, respectively.

Although the increase was modest, it broke the consecutive downward trend, suggesting support near the 90 cents/lb level. From an industry perspective, this is not a demand-driven rally but rather a short-covering and cost-side correction. For Chinese mills, raw material costs remain above 15,000 yuan/ton after exchange rate and tariff adjustments, which is still on the high side for downstream weaving and garment makers.

Resistance in Cost Pass-Through

The slight rise in imported cotton quotes directly impacts the raw material costs of spinning mills. At the SM-grade converted price of 15,278 yuan/ton, Xinjiang cotton spot prices are roughly in the 15,500-15,800 yuan/ton range, giving imported cotton a certain price advantage. However, mills' purchasing decisions depend not only on absolute prices but also on the sustainability of downstream orders.

Currently, downstream weaving and garment sectors are dominated by short-term and small-lot orders. The domestic market is affected by a slowing consumption recovery, while the export market faces destocking pressure in Europe and the US. In this context, mills generally adopt a 'hand-to-mouth' procurement strategy, avoiding inventory buildup. The slight price increase may further reinforce this cautious stance, as buyers fear chasing highs and prefer to wait for clearer signals.

International Market Tug-of-War

From a global supply-demand perspective, acreage and weather conditions in major Northern Hemisphere cotton-producing regions—the US, India, and Pakistan—remain key variables. USDA data show that drought in Texas has eased somewhat, but crop condition ratings are still historically low. In India, new crop sowing is nearing completion, but uneven monsoon rainfall may affect yields.

These supply uncertainties provide floor support for international cotton prices. However, weak demand in the global textile industry is undeniable. Operating rates in major textile-exporting countries like Vietnam and Bangladesh are generally at 60-70%, and China's cotton yarn imports are lower than last year. With both supply and demand weak, cotton prices are unlikely to form a clear trend, and range-bound fluctuations between 90-95 cents/lb may persist.

Practical Recommendations

For Buyers - Current imported cotton prices are in the mid-to-low range, but chasing rallies is not advisable. Keep procurement at 15-20 days of consumption to lock in short-term costs. - Monitor weather changes in US cotton regions and the USDA monthly supply-demand report; if drought worsens, consider increasing forward contract purchases moderately. - Use RMB exchange rate volatility windows to lock in imported cotton arrival prices in batches when settlement costs are favorable.

For Foreign Trade Enterprises - Include raw material price fluctuation clauses in export order quotes to prevent margin erosion from sudden cotton price increases. - Monitor raw material cost changes of Southeast Asian competitors; currently, China's imported cotton prices are slightly higher than Indian cotton, so be alert to order transfer risks. - For long-term contracts, negotiate floating pricing mechanisms with customers, using cotton futures price indices as anchors.