Reserve Cotton Auction Heat Persists, Textile Mills' Restocking Logic Shifts

On August 28, the reserve cotton auction once again closed with a 100% clearance rate, with an average price of 17,588 yuan per ton, up 154.8 yuan from the previous day. This marks another day of full clearance, pushing cumulative sales past 240,000 tons, all cleared. The market's absorbing capacity is evident.

Signals Behind the Bidding Data

The day's listed volume of 8,036.9 tons was fully sold, with the price spread between the highest and lowest bids narrowing to 770 yuan, indicating a more rational but still active bidding environment. A more telling sign is the divergence by cotton type: imported cotton averaged 17,606 yuan per ton with an average premium of 1,410 yuan, while Xinjiang cotton averaged 17,525 yuan with a premium of 1,063 yuan. The 347-yuan gap underscores mills' persistent preference for imported cotton's quality.

Cumulatively, the average price for reserve cotton stood at 17,263 yuan per ton, equivalent to 17,911 yuan on a 3128B basis, with an average premium of 1,433 yuan. Imported cotton's cumulative premium reached 1,562 yuan versus 1,147 yuan for Xinjiang cotton, maintaining its advantage. This premium structure suggests that amid a moderate recovery in downstream demand, high-grade cotton remains tight, and mills are willing to pay for stable quality.

Industry Chain Transmission and Procurement Adjustments

The high clearance rate is not an isolated phenomenon. The reserve auction's average price serves as a key reference for market expectations ahead of the new crop. For mills, rising premiums mean higher raw material costs, particularly for high-count yarn producers reliant on imported cotton, which may squeeze profit margins.

Moreover, the premium gap between imported and Xinjiang cotton may prompt mills to optimize import quota usage or adjust their cotton blending ratios to balance quality and cost. For export-oriented mills, cotton price fluctuations directly affect export quotes, reducing pricing flexibility in the short term.

It's noteworthy that cumulative reserve sales have reached 240,000 tons. If the current pace continues, supply pressure may ease. Yet mills' strong restocking appetite signals a cautiously optimistic outlook, possibly driven by concerns over the quality stability of the new crop and a desire to secure supply early.

Practical Recommendations

For Procurement Teams - Monitor daily premium changes; if imported cotton premiums remain elevated, consider increasing Xinjiang cotton usage to manage costs. - Plan cotton needs 2-3 months ahead based on order books to avoid last-minute buying that drives up costs. - Use reserve auction prices as a benchmark in supplier negotiations to secure more flexible pricing terms.

For Foreign Trade Companies - Incorporate raw material price adjustment clauses in quotes to protect margins from cotton price volatility. - Track the domestic-import price gap and lock in imported cotton supplies when favorable to hedge against currency and price risks. - Align export order cycles with reserve release schedules and new crop arrivals to avoid costly inventory accumulation.