July's reserve cotton auctions delivered a paradoxical result: all 80,200 tons of listed resources were sold, a 100% transaction rate, yet the monthly average price slid to 17,253 yuan per ton, marking a steady decline from early in the month. This divergence between volume and price reflects the dual pressure of weak off-season demand and rising supply, and reveals spinners' cautious yet urgent approach to raw material restocking.
High Auction Heat with Falling Prices
From the transaction structure, the performance gap between Xinjiang cotton and imported cotton deserves attention. Xinjiang cotton averaged 16,814 yuan per ton, or 17,472 yuan per ton converted to 3128 grade, with an average premium of 1,253 yuan. Imported cotton averaged 17,423 yuan per ton, or 18,026 yuan converted, with an average premium of 1,787 yuan. The clear premium for imported cotton indicates a rigid demand for higher-grade foreign cotton, especially for spinners constrained by import quotas, making imported reserve cotton a substitute supplement.
By production year, 2020 crop cotton had the largest volume at 35,700 tons, accounting for 44.50%; 2019 crop followed with 31,500 tons (39.33%); and 2021 crop only 13,000 tons (16.17%). This structure shows that reserve cotton releases are dominated by older crops, with new crop supply not yet available, forcing spinners to accept older resources, which may affect yarn quality and cost control.
Regional Concentration and Spinner Behavior
The geographical distribution of winning bidders is highly concentrated, with Shandong, Jiangsu, Zhejiang, Henan, and Hunan provinces together accounting for 54,500 tons, or 67.96% of the total. Shandong and Jiangsu, as traditional textile powerhouses, naturally lead in restocking demand; the inclusion of Henan and Hunan indicates that inland spinners maintain certain operating rates even in the off-season, with growing reliance on low-cost raw materials. Small and medium spinners, due to insufficient inventories and tight cash flow, prefer to acquire cost-effective cotton through auctions, while larger enterprises may rely more on long-term contracts or import channels.
Notably, the average auction price kept falling during the month, with narrowing premiums. This suggests that although auction enthusiasm remained high, spinners' willingness to bid higher is weakening. On one hand, Zhengzhou cotton futures continued to decline, transmitting bearish sentiment to the spot market; on the other hand, downstream yarn and fabric inventories are accumulating, orders are weak, and spinners are more sensitive to raw material costs. The auction is shifting from 'grabbing goods' to 'selecting goods,' with the price discovery function returning.
Transmission to the Industrial Chain and Expectations
The full transaction of reserve cotton injected liquidity into the market but also intensified oversupply expectations. Currently in the traditional off-season, terminal demand is unlikely to improve, yarn prices are under pressure, and spinners' profit margins are squeezed. In this context, the falling average auction price may further lower the spot cotton price center, exerting comparative pressure on Xinjiang cotton spot prices.
For imported cotton, the limited volume in reserve auctions and firm prices indicate a gap for high-grade foreign cotton. If quota policies are not relaxed, the price gap between imported and domestic cotton may remain wide, prompting spinners to favor more cost-effective Xinjiang cotton or reserve cotton in their blending.
Looking ahead, reserve cotton releases will continue, with supply gradually increasing, while demand is unlikely to improve significantly in the off-season. Cotton prices are likely to maintain a weak and volatile trend. Spinners should use the auction window flexibly, adjusting restocking pace based on orders and inventory, avoiding overstocking during a downward price channel.