Reserve Cotton Sales Near 17,000 Yuan/Ton: What's Driving Mills' Persistent Stocking Urge?

On August 4, all 8,014 tons of reserve cotton listed for sale were transacted, with an average price of 16,901 yuan/ton, up 39 yuan from the previous session. This marks another full transaction day in the ongoing release program, bringing cumulative sales to over 96,000 tons. While the steady supply appears to meet demand, the premium gap between imported and Xinjiang cotton reveals deeper industry signals.

Background

Imported cotton fetched an average of 17,136 yuan/ton, equivalent to 17,809 yuan/ton on a 3128B basis, with an average premium of 1,643 yuan. In contrast, Xinjiang cotton averaged 16,537 yuan/ton, equivalent to 17,224 yuan/ton, with a premium of 1,058 yuan. The 585-yuan premium difference underscores mills' stronger appetite for imported cotton, which offers better consistency in fiber length and strength—critical for high-count yarn production. Xinjiang cotton, meanwhile, is more often used for mid-to-low count products.

Cumulatively, as of August 4, the program has listed and sold 96,223 tons with a 100% transaction rate. The average price stands at 17,191 yuan/ton (17,820 yuan/ton on 3128B basis), with the highest transaction at 19,000 yuan and the lowest at 16,060 yuan—a spread of nearly 3,000 yuan reflecting quality-driven pricing. The average premium of 1,598 yuan indicates mills are willing to pay significant markups over the base price.

Industry Impact

The 100% transaction rate is not accidental; it reflects urgent restocking needs. As the industry transitions from off-season to peak, some mills see order recovery but hold low raw material inventories. Reserve cotton serves as a cost-effective supplement, making it a hot commodity. High transaction rates also signal bullish sentiment—mills prefer locking in supply now rather than risk future price hikes.

The premium gap between imported and Xinjiang cotton confirms a structural shortage of high-grade fiber. For mills producing high-count yarn and premium fabrics, imported cotton's stability and spinnability are irreplaceable, justifying higher prices. This divergence suggests that aggregate supply-demand figures may mask structural imbalances: low-grade cotton may see weak demand, while high-grade remains firm.

For downstream fabric and apparel makers, high cotton prices will gradually transmit to greige and finished fabric costs. Buyers calculating costs at current levels risk inventory devaluation if prices fall, while rising prices necessitate early raw material locking. Thus, the pace and pricing of reserve releases have become a key barometer for the entire supply chain.

Practical Recommendations

For Buyers - Monitor daily reserve transaction prices and premiums; if premiums narrow, consider waiting; if they widen, accelerate purchasing. - For high-count yarn needs, prioritize imported cotton auctions but compare post-premium costs with spot prices to avoid overpaying. - When placing forward orders with mills, consider cotton price linkage clauses to share raw material risk.

For Exporters - Incorporate rising cotton prices into cost calculations for export quotes; consider short-term or floating pricing. - Watch RMB exchange rate dynamics; appreciation can partially offset cotton price increases. - Use the reserve release window to secure long-term supply agreements with domestic suppliers to ensure stable raw material access.