On August 10, the domestic spot price for 3128B grade cotton settled at 17,952 yuan per tonne, a weekly gain of 2.93%. Behind this figure lies the combined force of persistent extreme heat in Xinjiang and high premiums in state reserve cotton auctions. For the textile chain, this surge is not an isolated event—it is redrawing profit boundaries and forcing spinners to recalibrate procurement strategies.
Extreme heat overlapping with boll-setting: yield fears underpin prices
From August 3 to 6, major cotton-growing areas in Xinjiang—including Turpan, Hami, and southern Bazhou—experienced persistent extreme heat, with temperatures exceeding 40°C and local peaks above 45°C. This coincided with the peak flowering to boll-enlargement stage, a critical window that determines yield. Heat accelerates water evaporation, weakens pollination, and raises the probability of boll shedding. Market participants reacted swiftly, with yield reduction expectations quickly building and providing fundamental support for higher prices.
The significance lies not just in the weather itself, but in its timing—the boll-setting stage is highly sensitive to temperature, and damage is often irreversible. This implies that new crop yields are likely to fall below earlier expectations, and the logic of tighter forward supply is difficult to disprove in the short term. For textile mills, this signals that raw material costs may stay elevated in the coming months, requiring proactive adjustments in purchasing rhythm and inventory management.
Zero unsold reserve auctions: a window into supply-demand tension
In parallel with the spot market, state reserve cotton auctions have shown a red-hot trend of "oversubscribed and fully sold." During the week of August 3-7, 40,100 tonnes were offered, with a 100% transaction rate, an average price of 17,014 yuan per tonne, equivalent to 17,663 yuan per tonne for 3128B grade, and a premium of 1,497 yuan per tonne. As of August 7, cumulative transactions reached 120,259.425 tonnes, with full sales and an average price of 17,173.33 yuan per tonne.
High premiums and zero unsold lots reveal two key facts: spot supply is genuinely tight, and downstream restocking demand remains stable. Notably, many small and medium-sized spinning mills are actively participating in reserve auctions to hedge against high-priced raw materials—reserve cotton offers cost advantages over market cotton, and bulk purchasing effectively lowers overall fiber costs. This "reserve-first" procurement behavior is a rational risk-aversion strategy in a high-price environment, further confirming the tightness in the spot market.
Profit divergence: the strong raw material, weak finished goods dilemma
In stark contrast to the strong raw material side, the downstream textile market remains in a clear off-season. Orders for apparel and home textiles are weak, traders and weavers are cautious, and most yarn mills are focused on destocking, keeping prices stable with only slight upward adjustments. Mainstream sales are concentrated in medium-count carded, combed, and compact yarns.
The biggest contradiction is that cotton price gains far exceed yarn price increases, narrowing the upstream-downstream spread and squeezing spinning margins. Under profit pressure, mills are reluctant to pay high prices for new cotton, adopting a wait-and-see stance in spot purchases and controlling raw material restocking volumes. This "strong raw materials, weak finished products" divergence means cost pressures cannot be smoothly passed downstream, leaving spinners to absorb the impact of high-priced fiber.
Short-term pattern unlikely to change, but upside limited
Overall, bullish factors still dominate in the short term: persistent heat threatens new crop output, and high premiums in reserve auctions reflect tight spot supply, supporting prices. However, the downstream demand shortfall is unlikely to heal quickly, and mills' profit pressure and cautious buying will continue to cap upside. The key words for the industry are "divergence" and "game-playing." The gap between raw and finished goods will not widen indefinitely, but its convergence depends on weather developments, reserve release pace, and the timing of end-demand recovery. Mills need to find a new balance between cost control and risk management.