On August 3, reserve cotton sales once again concluded with a 100% clearance rate, marking consecutive days of full clearance since the current round began. The 8,014.638 tonnes offered were all sold, with an average price of 16,861.97 yuan/ton, down 95.86 yuan/ton from July 31, but the converted 3128B price remained high at 17,553.17 yuan/ton. The coexistence of high clearance and high prices reflects the urgency of textile mills to replenish stocks and their cautious expectations about future raw material supply.
Background
The current reserve cotton sales started in late July. As of August 3, cumulative offerings reached 88,208.582 tonnes, with a cumulative clearance rate of 100% and an average price of 17,217.26 yuan/ton (converted 3128B: 17,841.97 yuan/ton). Notably, the highest transaction price touched 19,000 yuan/ton, while the lowest was 16,060 yuan/ton, a spread of nearly 3,000 yuan, indicating significant quality differences among lots and clear bidding divergence among mills.
The performance of imported cotton versus Xinjiang cotton deserves attention. On that day, imported cotton averaged 17,088.68 yuan/ton (converted 3128B: 17,775.11 yuan/ton) with an average premium of 1,609.11 yuan/ton; Xinjiang cotton averaged 16,582.69 yuan/ton (converted 3128B: 17,279.77 yuan/ton) with a premium of 1,113.77 yuan/ton. The significantly higher premium for imported cotton reflects market recognition of its quality and suggests that high-count yarn mills have rigid demand that domestic cotton cannot fully substitute.
Industry Impact
The 100% clearance rate reflects low raw material inventories among textile mills. According to public industry data, downstream yarn mills maintain high operating rates, but commercial cotton inventories continue to decline, leaving a narrow window for restocking. Reserve cotton, as a cost-effective supplementary source, naturally attracts pursuit. However, the average transaction price shows no significant discount to spot prices, and some lots saw intense bidding, meaning actual costs for mills are not low.
For mills, high-priced restocking directly compresses processing margins. Current cotton yarn prices are sluggish to follow rises; if cotton costs remain high, yarn profit margins may narrow further. Small and medium enterprises focusing on low-to-mid count yarns face greater pressure due to weaker cost pass-through. In contrast, large enterprises, with capital and order advantages, are better positioned to secure quality supply through bidding, potentially accelerating industry concentration.
Price trends show a slight decline from earlier highs, but converted 3128B prices remain firm. This suggests that market expectations of tight supply later in the season have not fundamentally reversed. International cotton price movements, the pre-harvest gap before new cotton arrives, and the sustainability of downstream orders will be key variables affecting the pace of reserve sales.