International cotton prices edged up, and Zhengzhou cotton futures strengthened in tandem, but cotton yarn spot prices remained hesitant. On August 6, the international cotton price index (SM) rose 0.50 cents/lb to 93.76 cents/lb, translating to RMB 15,653 per ton at general trade port delivery (at 1% import duty); the M index rose to 92.21 cents/lb, equivalent to RMB 15,398 per ton. Meanwhile, the main Zhengzhou cotton futures contract (2609) closed at RMB 16,150 per ton, up RMB 185 per ton, with active trading volume. Why did the upward signals from the raw material and futures markets fail to transmit smoothly to cotton yarn prices? This reflects a typical cost pass-through dilemma in the textile supply chain.
Raw Material and Futures: Short-Term Strength, Limited Support
From a data perspective, the slight rise in foreign cotton quotes provides some cost support for domestic lint cotton. At the current exchange rate, import cotton port prices have risen to RMB 15,400-15,700 per ton, narrowing the gap with the Zhengzhou futures price of RMB 16,150 per ton. This suggests that the price advantage of imported cotton is diminishing, prompting some mills to switch to domestic cotton, which underpins domestic prices. However, the sustainability of this support is questionable—the rise in international prices is more sentiment-driven than a fundamental shift in supply-demand dynamics.
The volume-driven rally in Zhengzhou futures reflects market divergence. On one hand, stronger foreign cotton boosts bullish sentiment; on the other, downstream orders have not shown significant recovery, and the high premium of futures may have overextended. For textile enterprises, futures volatility directly impacts raw material procurement costs, but if final demand fails to keep pace, futures gains may squeeze profit margins.
Cotton Yarn: The 'Reservoir' of Cost Pass-Through
Cotton yarn, as an intermediate between cotton and finished fabrics, is influenced by both cost and demand. Currently, higher international cotton prices do raise the theoretical cost of yarn, but actual spot prices have not followed suit. The reason is that downstream demand for yarn remains flat, with weavers purchasing cautiously and only replenishing on a need-to basis, unwilling to absorb higher costs. This 'cost-push but price-stick' phenomenon is common in the textile chain.
From a bullish/bearish rating perspective, lint cotton scores 1, while cotton yarn scores only 0.5, reflecting market divergence. Lint cotton is supported by cost and futures linkage, while yarn lacks upward momentum due to weak demand. This implies that yarn prices will likely fluctuate narrowly, and even if raw material costs rise, a trend is unlikely. For spinners, this means further compression of profit margins, especially for SMEs that cannot differentiate products to absorb costs.
Industry Impact: Rebalancing Procurement Strategies and Export Pricing
This cost pass-through bottleneck affects different chain segments differently. For upstream ginners and traders, higher foreign cotton prices support sales, but they must be wary of futures pullbacks. For midstream spinners, the scissors gap between rising raw material costs and stagnant product prices will force them to optimize inventory management and procurement timing. For downstream weavers and garment makers, stable yarn prices offer a relatively predictable purchasing window.
On the foreign trade front, RMB exchange rate fluctuations and tariff policy changes will directly affect the actual cost of imported cotton. The current port price at 1% duty already includes exchange rate factors; if RMB depreciates, import costs will rise further, prompting exporters to adjust sourcing or hedge exchange rates. Additionally, international cotton price trends are linked to global supply factors such as weather and planting area in major producing countries, which may cause volatility in coming months.