The August 12 reserve cotton auction closed with a 100% turnover rate, as all 8,002.631 tons offered were sold at an average price of 17,283.18 yuan/ton, up 172.12 yuan from the previous session. The sustained high price level reflects a delicate balance between spinners' restocking demand and their cost tolerance.
Market Context
The day's transactions showed a clear split: imported cotton averaged 17,403.60 yuan/ton, equivalent to 18,025.18 yuan/ton on a 3128B basis, with an average premium of 1,545.18 yuan/ton; Xinjiang cotton averaged 17,084.77 yuan/ton, equivalent to 17,647.63 yuan/ton, with a premium of 1,167.63 yuan/ton. The price gap of about 319 yuan/ton and a premium difference of nearly 380 yuan indicate that mills still accept a quality premium for imported cotton.
Cumulative data are even more telling: as of August 12, total reserve cotton offered reached 144,301.309 tons, all sold, with an average price of 17,177.28 yuan/ton (17,801.85 yuan/ton on a 3128B basis). Imported cotton averaged 17,351.88 yuan/ton with a premium of 1,714.76 yuan/ton, while Xinjiang cotton averaged 16,798.61 yuan/ton with a premium of 1,180.90 yuan/ton. The premium for imported cotton has consistently exceeded that for Xinjiang cotton by about 534 yuan/ton, a pattern that has stabilized in recent auctions.
Notably, the spread between the highest bid (18,000 yuan/ton) and the lowest (16,590 yuan/ton) widened to 1,410 yuan/ton, larger than in previous days. This suggests growing divergence in bidding for different grades and origins, with lower-grade cotton facing shrinking premium space, though no failed sales have yet occurred.
Industry Impact
The 100% turnover is not accidental but results from multiple factors. On one hand, mills' raw material inventories are generally low, and restocking demand is being released at the tail end of the traditional August off-season. On the other hand, reserve cotton prices remain competitive relative to the spot market, especially for imported cotton at around 18,000 yuan/ton on a 3128B basis, which appeals to producers of high-count yarns.
However, the marginal change in premiums deserves attention. Cumulatively, imported cotton premiums average 1,714.76 yuan/ton versus 1,180.90 yuan/ton for Xinjiang cotton, but on August 12, the imported premium was 1,545.18 yuan/ton and the Xinjiang premium 1,167.63 yuan/ton. The imported premium has clearly fallen below its cumulative average, signaling that some mills are becoming cautious at high price levels, and auction heat may cool regionally.
For downstream players, high cotton costs are transmitting to yarn prices. If the average auction price stays above 17,200 yuan/ton, the raw material cost for 32-count carded yarn will rise by about 300-400 yuan/ton month-on-month, while final order prices adjust with a lag, squeezing mill margins. Export-oriented firms should watch the domestic-international price spread; the current gap of around 300 yuan/ton between imported and Xinjiang cotton, if widened, could undermine the competitiveness of export quotes.