The first week of central reserve cotton sales delivered a 'full fill' result: all 40,100 tons were sold at an average price of 17,404 yuan/ton with significant premiums. This directly reflects textile mills' genuine anxiety about supply gaps before the new cotton crop—not weak demand, but structural supply tightness.
Price Divergence: Stable Domestic, Strong International, Widening Spread
Domestic Zhengzhou cotton futures averaged 15,980 yuan/ton, down 0.5% week-on-week, with fluctuations under 100 yuan, typical of policy-supported stability. The National Cotton Price B Index averaged 17,610 yuan/ton, down 0.3%. Reserve sales, primarily imported cotton, suppressed import demand, with the International Cotton Index (M) averaging 88.45 cents/lb, translating to a landed cost of 14,618 yuan/ton. The domestic-international spread widened to 2,992 yuan/ton.
International markets moved independently. ICE cotton averaged 80.59 cents/lb, back above the 80-cent threshold. Two factors supported this: Middle East tensions reduced oil traffic through the Strait of Hormuz by 75%, driving commodity prices higher; and improved US cotton export data—net sales up 49% week-on-week—along with Brazilian cotton exports surging 32% year-on-year in early July.
Yarn markets showed 'stable domestic, rising import' trends. Domestic C32S combed yarn averaged 23,318 yuan/ton, flat, while imported C32S combed yarn averaged 22,970 yuan/ton, up 70 yuan. The domestic-import spread narrowed to 348 yuan/ton. Polyester staple fiber rose 1.7% to 7,584 yuan/ton, reducing the substitution pressure on cotton.
Dual Shocks: Tariffs and Geopolitics Pressure Exports
On July 23, the US imposed 10%-12.5% tariffs on 60 countries under Section 301, with China at 12.5%. The EU fined AliExpress 550 million euros under the Digital Services Act, raising compliance costs for small parcel direct shipping. Both policies create a 'tariff + regulation' double squeeze on Chinese textile and apparel exports.
June textile and apparel exports reached $29.27 billion, hitting a year-to-date high, but this likely reflects front-loading effects. Among 41 A-share textile and apparel firms, 23 reported profit growth, with 12 exceeding 100% growth. However, profit margins for exporters are compressing. Middle East shipping risks persist, with supertanker traffic through the Strait of Hormuz dropping from 8 to 2 per day, keeping freight costs high and delivery timelines uncertain.
Industry Trends: Restocking Intentions Rise, Heat Risk Looms
Spinning mills in Zhejiang maintain high operating rates, with export orders and profitability outperforming domestic sales. As the 'golden September and silver October' season approaches, some mills show stronger restocking intentions, evidenced by the 100% transaction rate for reserve cotton. However, heat risk in Xinjiang must be monitored: persistent high temperatures and low rainfall in southern Xinjiang increase local irrigation pressure, potentially causing boll shedding and affecting yields. Hebei and Shandong show stable growth, Hunan has stable planting areas, while Hubei faces acreage reductions.