The average transaction price of 17,177.76 yuan per ton in the fourth week of reserve cotton sales rose slightly from the previous week, but the average premium narrowed to 1,347.58 yuan per ton from over 1,500 yuan in the first week. This data reveals a key signal: bidding enthusiasm remains, but market sentiment is shifting from panic buying to precise calculation. Mills are no longer paying for inventory anxiety; instead, they use reserve cotton as a tool to adjust cash flow and raw material structure.
Event Background
China National Cotton Reserves Corporation listed 40,060.75 tons from August 10-14, maintaining a 100% transaction rate for the fourth consecutive week. The price converted to standard grade (3128) was 17,827.58 yuan per ton, with the highest transaction at 18,000 yuan and the lowest at 16,390 yuan, narrowing the price range by about 300 yuan from the previous week, indicating reduced bidding divergence.
Cumulatively, from July 20 to August 14, reserve cotton sales reached 160,320.175 tons, with an average price of 17,174.44 yuan per ton and an average premium of 1,530.01 yuan. Notably, the cumulative highest transaction price of 19,370 yuan occurred in earlier weeks, while this week's high fell to 18,000 yuan, showing that impulsive high-price bidding is fading.
By variety, Xinjiang cotton averaged 16,986.95 yuan per ton (17,591.94 converted), with a premium of 1,111.94 yuan; imported cotton averaged 17,284.04 yuan (17,958.83 converted), with a premium of 1,478.83 yuan. The price gap between imported and Xinjiang cotton widened from about 250 yuan to 297 yuan, indicating persistent preference for higher-grade imported cotton.
Industry Impact
The average transaction price closely following the spot market means reserve sales have moved from 'price discovery' to 'price anchoring'. For textile mills, stable reserve supply compresses large price fluctuations, making cost calculations more reliable when taking orders. This explains the 'buy-as-needed' strategy—with supply guaranteed, storing cotton becomes a burden of warehousing and capital costs.
The narrowing premium also implies moderate recovery in downstream demand. If orders were strong, mills would pay higher premiums to lock in volumes; the current 1,347 yuan premium suggests limited yarn profit margins, discouraging excessive raw material cost increases. For foreign trade companies, this may enhance the competitiveness of cotton yarn export quotes, but they should watch the domestic-import price gap's impact on imported yarn substitution.
From an industrial belt perspective, Xinjiang cotton's average price is lower than imported, but the converted standard-grade gap is not significant, indicating Xinjiang cotton's cost-effectiveness under the quality premium system. However, higher premiums for imported cotton show that some high-end fabric orders require specific fiber length and strength, which domestic cotton cannot fully substitute.