On August 10, domestic 3128B grade cotton spot prices settled at 17,952 yuan per ton, up 2.93% within a week. This figure may look like weather-driven speculation, but it actually reflects a deeper tug-of-war across the industry chain—the price gap between raw materials and finished goods is widening, further squeezing spinners' margins.
Background
Xinjiang cotton is in the critical growth stage from full bloom to boll enlargement, where climate directly determines yield. From August 3 to 6, core planting areas including Turpan, Hami, and southern Bazhou experienced persistent extreme heat, with temperatures exceeding 40°C and local peaks above 45°C, coinciding with the boll-setting window. High temperatures accelerate water evaporation, weaken pollination, and raise the probability of boll shedding, fueling market expectations of reduced new crop output.
Supply-side tension was more directly reflected in state reserve cotton auctions. During the week of August 3-7, all 40,100 tons of reserve cotton offered were fully sold, with a 100% transaction rate. The average price was 17,014 yuan per ton, equivalent to 17,663 yuan per ton for 3128B grade, with an average premium of 1,497 yuan per ton. As of August 7, cumulative reserve sales reached 120,259.425 tons, maintaining a full-sale record with an average price of 17,173.33 yuan per ton. The high premiums and zero unsold lots indicate tight spot supplies and stable downstream restocking demand.
Industry Impact
The strength of raw materials contrasts sharply with the weak downstream textile season. Terminal orders for apparel and home textiles are sluggish, traders and fabric mills are cautious, and yarn mills prioritize destocking, keeping prices stable with only minor upward adjustments. Main shipments are concentrated in conventional medium-count carded, combed, and compact yarns, indicating a lack of incremental demand.
The biggest contradiction is that cotton price increases far outpace yarn price hikes, narrowing the spread and shrinking spinning profits. Under pressure, mills resist high-priced new cotton, adopt a wait-and-see attitude in spot purchases, and control restocking volumes. To offset costs, many small and medium mills turn to reserve cotton auctions, leveraging the cost advantage to lower overall fiber costs—a key risk-hedging tool.
In the short term, bullish factors dominate: Xinjiang heat threatens new crop output, and high premiums in reserve auctions reflect tight supply. However, weak downstream demand will continue to cap price upside, and the industry is likely to maintain a pattern of strong raw materials but weak finished goods.