When Turpan's temperature exceeded 45°C, cotton futures and spot markets reacted in tandem. On August 10, the domestic standard 3128B grade cotton spot price stood at RMB 17,952 per ton, a weekly increase of 2.93%—a figure that reflects the intertwined impact of extreme weather and reserve cotton auctions. For the textile industry chain, every fluctuation in raw material prices triggers a redistribution of profits.
Background
The coincidence of extreme heat with the critical boll-setting stage is the direct trigger. From August 3 to 6, core cotton-growing areas in Xinjiang—including Turpan, Hami, and southern Bazhou—experienced sustained temperatures above 40°C, with local extremes exceeding 45°C. These conditions overlapped with the flowering-to-boll-enlargement phase, accelerating water evaporation, weakening pollination, and raising the probability of boll shedding. Market expectations of reduced yields began to be priced in, lifting both futures and spot prices.
Data from reserve cotton auctions corroborate the tightness in physical supply. During the week of August 3-7, 40,100 tons of reserve cotton were listed, all sold at a 100% transaction rate, with an average price of RMB 17,014/ton and a premium of RMB 1,497/ton over the base grade. Cumulatively, as of August 7, 120,259 tons had been transacted with zero unsold lots, at an average price of RMB 17,173/ton. The high premiums and full clearance indicate strong demand for cheaper cotton sources among spinners.
Industry Impact
The scissors gap between strong raw materials and weak finished goods is squeezing spinning margins. Terminal orders for apparel and home textiles remain sluggish, with fabric mills and traders cautious in purchasing. Yarn mills are focused on destocking, with only modest price hikes attempted. Regular yarns like medium-count carded, combed, and compact are the main movers, but cotton price increases far outpace yarn price adjustments, narrowing spreads and eroding profits.
Under profit pressure, procurement behavior is splitting: large enterprises use financial strength to buy on dips in the spot market, while small and medium mills increasingly turn to reserve auctions to lower overall cotton costs. This structural shift temporarily alleviates cost pressures but also reduces reliance on market cotton, potentially reinforcing bullish sentiment in the spot market.
In the short term, bullish factors still dominate. The persistence of the heatwave is uncertain, and yield-reduction expectations will not quickly dissipate; high premiums in reserve auctions reflect tight physical supply, providing price support. However, weak downstream demand and cautious procurement will cap upside. The industry will likely maintain a divergent pattern of "strong raw materials, weak finished goods" until new cotton arrives or demand genuinely recovers.