The weekly average price of reserve cotton sales reached 17,463 yuan/ton, with a converted 3128 price of 18,172 yuan/ton and an average premium of 1,184 yuan/ton. This premium is notably narrower than the cumulative average of 1,434 yuan/ton since the program started on July 20, signaling a cooling of speculative buying. Despite a 100% transaction rate, the shrinking premium indicates mills are becoming more cautious about high-priced raw materials.
Background
From August 24 to 28, a total of 40,100 tons of reserve cotton were offered and fully sold. Xinjiang cotton averaged 17,413 yuan/ton (converted 3128: 18,039 yuan/ton) with a premium of 1,051 yuan/ton, while imported cotton averaged 17,482 yuan/ton (converted 3128: 18,220 yuan/ton) with a premium of 1,232 yuan/ton. The price gap between the two narrowed to about 181 yuan/ton, down from the cumulative gap of 415 yuan/ton, suggesting imported cotton's cost advantage has weakened and mills are turning back to Xinjiang cotton.
Since July 20, cumulative reserve sales have reached 240,683.76 tons, all sold, with an average price of 17,264 yuan/ton (converted 3128: 17,911 yuan/ton). Weekly data shows the average price rose from around 17,200 yuan/ton in the first week to 17,463 yuan/ton this week, up about 1.5%, but the premium fell from over 1,500 yuan/ton initially to 1,184 yuan/ton, reflecting a pattern of stable volume, rising price, and narrowing premium.
Industry Impact
By buyer location, Shandong, Hubei, and Jiangsu provinces accounted for 21,000 tons, or 52.34% of the weekly total. This concentration highlights the heavy reliance of textile industrial belts on policy-supplied cotton. Shandong, as a major cotton textile province, has always been a top participant; Hubei and Jiangsu benefit from logistics advantages and strong downstream demand. For inland mills, the steady release of reserve cotton effectively supplements market supply and alleviates structural shortages of high-grade cotton.
The narrowing premium has multiple implications for the supply chain. For ginners, reserve cotton prices serve as an important benchmark; a declining premium may dampen expectations for new crop procurement, affecting seed cotton prices. For mills, cotton prices remain high, but the stable supply of reserve cotton provides a buffer, encouraging just-in-time purchasing rather than heavy stockpiling. Notably, the narrowing gap between imported and Xinjiang cotton may prompt some mills to adjust their cotton blend ratios and increase the use of domestic cotton.
From a policy perspective, the pace of reserve cotton releases remains steady, with weekly volumes around 40,000 tons, ensuring supply without causing price shocks. This 'trickle' approach helps smooth seasonal fluctuations but also caps upside price movements. It is expected that reserve cotton will continue to act as the main market stabilizer until the new crop arrives.