The domestic cotton spot market is experiencing a rare weekly surge: as of August 10, 3128B grade cotton was quoted at 17,952 yuan/ton, up 2.93% in one week. This gain is uncommon for the same period in recent years, driven by the combined effect of extreme heat in Xinjiang and high premiums in reserve cotton auctions, quickly injecting supply tightening expectations into prices. However, the downstream textile off-season has not warmed up in tandem, widening the temperature gap between upstream and downstream segments.
Event Background
Xinjiang's core cotton regions are in the critical growth phase from full flowering to boll expansion, where climate conditions directly determine new crop yields. From August 3 to 6, major producing areas including Turpan, Hami, and southern Bayingolin experienced persistent extreme heat, with temperatures exceeding 40°C across the region and local extremes surpassing 45°C. The heat window coincided perfectly with the pollination and boll-setting period, accelerating field moisture evaporation, weakening pollination ability, and significantly increasing the probability of flower and boll shedding. Market participants responded keenly, with production reduction expectations heating up and providing fundamental support for price increases.
Meanwhile, the reserve cotton auction market presented a rare scene of zero failed bids and high premiums. During August 3-7, the 40,100 tons of reserve cotton offered were all transacted, achieving a 100% transaction rate, with an average price of 17,014 yuan/ton, equivalent to 17,663 yuan/ton for 3128B grade, and an average premium of 1,497 yuan/ton. Cumulatively, as of August 7, 120,259.425 tons had been transacted in this round, maintaining a full transaction rate, with a cumulative average price of 17,173.33 yuan/ton, equivalent to 17,801.48 yuan/ton for 3128B grade. The coexistence of high premiums and zero failed bids indicates tight spot supply and stable downstream restocking demand.
Industry Impact
The strength at the raw material end contrasts sharply with downstream weakness. Terminal apparel and home textile orders are lackluster, traders and weavers are cautious, and most yarn enterprises prioritize destocking, keeping prices stable with only minor tentative increases. Main shipments are concentrated in medium-count carded, combed, and compact yarns, while high-count and differentiated varieties see flat demand.
The biggest contradiction in the supply chain is that cotton price increases far exceed yarn price hikes, narrowing the spread and squeezing spinning margins. Under profit pressure, spinners resist high-priced new cotton, adopt a wait-and-see attitude in spot point-price purchases, and actively control restocking volumes. To offset costs, many small and medium-sized mills adjust their procurement structure and actively participate in reserve cotton auctions. Compared with market-distributed domestic cotton, reserve cotton offers a clear cost advantage, enabling bulk purchases to lower overall cotton costs, becoming the main cost-reduction and risk-hedging tool for small mills.
In the short term, bullish factors still dominate the cotton market: Xinjiang's high temperatures threaten new crop output, and production reduction expectations are hard to dissipate quickly; high premiums in reserve auctions reflect tight spot supply, supporting price strength. However, downstream demand weaknesses cannot be repaired quickly, and the current status of profit pressure and cautious purchasing will continue to constrain upward price space. The industry expects the pattern of strong raw materials and weak finished goods to persist, with price transmission blockages potentially intensifying upstream-downstream gaming.