On August 3, the reserve cotton auction achieved a 100% clearance rate again, but the average price dropped by nearly 96 yuan per ton from the previous session. This combination sends a more complex signal than it appears: textile mills did not shy away from purchasing despite the price pullback; instead, they accelerated restocking at lower levels.
Price Weakness, Yet Strong Demand
On that day, 8,014.638 tons were offered and all were sold, with an average price of 16,861.97 yuan/ton (equivalent to 17,553.17 yuan/ton for Grade 3128B). The highest price was 17,540 yuan/ton and the lowest was 16,200 yuan/ton. Compared with July 31, the average price fell by 95.86 yuan/ton, a decline of about 0.57%.
By category, imported cotton averaged 17,088.68 yuan/ton with an average premium of 1,609.11 yuan, while Xinjiang cotton averaged 16,582.69 yuan/ton with a premium of 1,113.77 yuan. Imported cotton was 505.99 yuan/ton more expensive than Xinjiang cotton, and its premium was 495.34 yuan higher. This indicates that the scarcity premium for imported cotton remains significant, while Xinjiang cotton appeals more to cost-sensitive mills.
Cumulative Data Reveals Demand Resilience
As of August 3, cumulative reserve cotton offered reached 88,208.582 tons, with a 100% clearance rate. The cumulative average price stood at 17,217.26 yuan/ton (equivalent to 17,841.97 yuan/ton for Grade 3128B); the highest price was 19,000 yuan/ton and the lowest 16,060 yuan/ton, with an average premium of 1,615.04 yuan.
Imported cotton cumulatively averaged 17,399.27 yuan/ton with an average premium of 1,774.79 yuan, while Xinjiang cotton averaged 16,782.45 yuan/ton with a premium of 1,233.38 yuan. The sustained 100% clearance rate indicates that even with prices off their highs, mills' raw material inventories remain low, and essential restocking demand has not been disrupted by price fluctuations.
The Game Between Price Correction and Restocking
The nearly 96 yuan drop in average price alongside full clearance reflects a tug-of-war between upstream and downstream. For mills, a drop of nearly 100 yuan per ton reduces yarn production costs by about 80-100 yuan per ton, a marginal improvement significant enough to trigger purchasing decisions in a low-margin environment. Meanwhile, the continuous release of reserve cotton signals the policy intent of ensuring supply and stabilizing prices, discouraging panic buying.
The widening price gap between imported and Xinjiang cotton also reflects logistics and exchange rate factors. The higher premium for imported cotton suggests that producers of high-count and combed yarns have a short-term irreplaceable dependence on imported quality and are willing to pay a premium to secure supply. In contrast, Xinjiang cotton's more restrained premium indicates a more pragmatic cost-benefit approach among inland mills.
Transmission Effects on the Industry Chain
Reserve cotton auction prices are a key barometer for the spot market. The current average price range of 16,800-17,200 yuan/ton (equivalent to 17,500-17,800 yuan/ton for Grade 3128B) provides support for the nearby futures contracts. For upstream ginners, accelerating reserve cotton destocking reduces inventory pressure before the new crop season; for traders, the high premiums warrant caution against overpaying.
Downstream, cotton yarn prices have limited room to follow rises, and grey fabric orders have not shown significant growth. This implies that mills are purchasing cotton to maintain production rather than to speculate. Therefore, cotton prices are likely to remain range-bound in the near term, with limited upside or downside.