Imported cotton prices rebounded for the second consecutive day on July 28, with quotes at major Chinese ports edging up again, sending a clear cost signal to textile mills that had been waiting on the sidelines. The international cotton price index (SM) closed at 91.23 cents per pound, up 0.92 cents from the previous trading day, equivalent to a landed price of approximately 15,278 yuan per ton at the 1% tariff rate. On the same day, the M-grade index stood at 89.22 cents per pound, translating to 14,945 yuan per ton.
Supply-Demand Dynamics Behind Price Fluctuations
Looking at recent trends, imported cotton quotes experienced a series of minor increases from July 22 to 24, followed by a slight dip on July 27, only to strengthen again on July 28. This short-cycle volatility reflects the tug-of-war between bullish and bearish forces in the international cotton market. On one hand, the new cotton crop in major Northern Hemisphere producing regions is entering a critical growth phase, with weather-related production shortfall expectations gaining momentum. On the other hand, the recovery in global textile end-user demand has been slower than anticipated, and destocking progress remains sluggish. These two forces offset each other, keeping cotton prices oscillating in a narrow range.
For Chinese textile enterprises, the changing spread between imported and domestic cotton directly influences raw material procurement decisions. The current SM-grade imported cotton price of 15,278 yuan per ton has approached or even inverted relative to the spot price of domestic 3128B-grade cotton. This means the cost advantage of using imported cotton is fading, and some spinning mills that rely heavily on imported cotton may need to reassess their raw material mix.
Industry Impact: Cost Transmission and Order Negotiation
As the most upstream bulk raw material in the textile supply chain, cotton price fluctuations cascade through spinning, weaving, dyeing, and garment manufacturing. The current uptick in imported cotton prices impacts downstream enterprises on two fronts:
- Spinning margins are squeezed. Yarn prices typically adjust with a lag to raw material changes, so a sudden cotton price rise directly erodes processing profits, especially for high-count yarn lines that depend on imported cotton.
- Export order pricing becomes more challenging. Overseas buyers are highly sensitive to final product prices, making it difficult for mills to fully pass on higher raw material costs through export quotes. Companies must strike a delicate balance between securing orders and protecting margins.
Notably, this price increase occurs at the transition from the traditional slow season to the peak season. August to September is typically the period for autumn/winter fabric stocking. If cotton prices remain elevated, downstream weaving mills may delay raw material purchases or switch to alternative fibers, potentially impacting capacity utilization across the entire supply chain.