When the price gap between domestic and imported cotton narrowed from nearly 4,000 yuan per ton to 3,350-3,750 yuan per ton, the cost-effectiveness of imports is being re-evaluated. Data from late August shows that the spread between Brazilian cotton under 1% tariff and Xinjiang machine-picked cotton narrowed by 300-500 yuan per ton compared with mid-month, while premiums for high-quality cotton strengthened, signaling a clear market divergence.
Narrowing Spread: A Turning Point for Import Competitiveness
According to traders in Qingdao, Zhangjiagang, and Shanghai, ICE cotton futures rose last week, lifting overseas offers, but Zhengzhou cotton futures lagged, rapidly compressing the domestic-import spread. For example, Brazilian cotton M 1-5/32 (strength 28 GPT) was quoted at 86.5 cents/lb on August 22-24, with a 1% tariff import cost of about 14,455 yuan/ton, while the same grade Xinjiang cotton in inland warehouses was quoted at 18,000-18,300 yuan/ton. Although the spread remains at 3,350-3,750 yuan/ton, it has narrowed significantly from earlier in August.
This change directly weakens the appeal of imported cotton. Combined with continued reserve sales, mills have more low-cost options, narrowing the competitive window for imports. For mills reliant on imported cotton, procurement timing needs adjustment—waiting may miss low prices, but chasing highs risks higher costs.
Strengthening Premiums for High-Quality Cotton: Structural Shift
Notably, the basis between high-spec Brazilian, Australian cotton and lower-quality resources is widening. A Qingdao cotton enterprise revealed that the trend of “high-quality cotton at high prices” has become evident over the past half month. For instance, Brazilian cotton M 1-5/32 with strength 30-31 GPT was quoted at 88.5-89 cents/lb, 2-2.5 cents higher than the 28 GPT grade, translating to a cost difference of about 300-400 yuan/ton.
This divergence reflects an upgrade in downstream demand: mills have rigid demand for high-count, high-strength cotton, while low-grade cotton faces pressure from substitutes. For traders, this means inventory structures need optimization—stocking low-quality resources may incur greater depreciation risk, while high-quality cotton offers stronger resilience.
Transmission along the Chain: From Procurement to Pricing
The narrowing spread and strengthening premiums are reshaping pricing logic across the chain. For textile mills, the shrinking cost gap between imported and domestic cotton may prompt some orders to shift back to domestic cotton, especially as the sliding-duty import cost (14,925-15,220 yuan/ton) approaches domestic prices, making domestic cotton more cost-effective.
Meanwhile, continued reserve sales provide stable low-cost supply, capping upside price movement. For traders, the widening basis means pricing power tilts toward holders of high-quality resources, requiring more refined quoting strategies rather than simply following futures fluctuations.