Reserve Cotton Sales Week 3: Full Clearance Persists, Spinners Shift to Price Locking

In the week of August 3-7, 2026, the third week of reserve cotton sales saw 40,065 tons listed and fully cleared, marking the third consecutive week of 100% clearance. The average price was 17,014 RMB/ton, with a premium of 1,497 RMB/ton over the base level. While the numbers may seem unremarkable, the increase in participating enterprises and the high of 19,370 RMB/ton signal a shift from stockpiling to price locking among spinners.

Market Context

Cumulative sales since July 20 have exceeded 120,000 tons, all cleared at an average of 17,173 RMB/ton. A notable structural difference emerged: imported cotton averaged 17,205 RMB/ton with a premium of 1,702 RMB/ton, while Xinjiang cotton averaged 16,684 RMB/ton with a premium of 1,140 RMB/ton. The nearly 500 RMB/ton premium for imported cotton reflects spinners' preference for its consistent quality and the structural shortage of high-grade cotton.

This wave of replenishment is not just about preparing for autumn/winter orders; it is a strategic move to hedge against price volatility before the new cotton crop arrives. Despite weak downstream demand, spinners are betting on current reserve prices rather than risking higher costs later.

Industry Impact

The buying spree has several ripple effects. For spinners, locking prices enhances cost certainty, especially for small and medium enterprises, easing financial pressure. However, high premiums raise actual costs and squeeze margins. For traders, the sustained premium on imported cotton may boost import orders, but currency and freight risks remain. For upstream ginners, stable reserve sales dampen spot prices, potentially narrowing their pricing power before the new crop.

Price trends show range-bound trading, but structural divergence is clear: high-grade cotton is scarce, while lower grades are ample. The gap between highest and lowest transaction prices reached 3,170 RMB/ton, far exceeding normal grade differentials. Buyers focusing only on averages may miss the premium for quality. If replenishment demand persists, clearance rates will stay high, supporting prices; but weak terminal orders could cap upside.

Practical Recommendations

For Buyers - Monitor the price gap between imported and Xinjiang cotton; if it widens beyond 600 RMB/ton, consider imported cotton for better quality premium. - Use the stable reserve sales window to build positions gradually, avoiding cost spikes from large one-time purchases. - For high-grade cotton needs, lock forward contracts with traders early to avoid volatility around new crop listings.

For Foreign Trade Companies - Incorporate current reserve cotton premiums into export quotes to avoid margin erosion from underestimated raw material costs. - Use Zhengzhou cotton futures for hedging, especially for long-term autumn/winter contracts. - Stay updated on import quota policies; adjust procurement strategies to optimize costs if tariff adjustments occur.