Reserve Cotton Sales Maintain Full Clearance for Six Straight Weeks: Supply Rhythm and Capital Sentiment Deeply Intertwined

From August 24 to 28, the average weekly transaction price of reserve cotton settled at 17,463 CNY/ton, equivalent to 18,172 CNY/ton on a 3128 standard grade basis, with an average premium of 1,184 CNY/ton. This marked the sixth consecutive week of a 100% clearance rate since the new round of reserve cotton sales began on July 20. A cumulative 240,000 tons have been fully absorbed by the market, with an average price of 17,264 CNY/ton and an overall premium of 1,434 CNY/ton, indicating persistently strong willingness among downstream mills to procure reserve cotton.

Transaction Structure and Price Signals

From a structural perspective, the price gap between Xinjiang cotton and imported cotton showed subtle changes this week. Xinjiang cotton averaged 17,413 CNY/ton (equivalent to 18,039 CNY/ton on a 3128 basis) with a premium of 1,051 CNY/ton, while imported cotton averaged 17,482 CNY/ton (equivalent to 18,220 CNY/ton on a 3128 basis) with a premium of 1,232 CNY/ton. The gap in transaction prices was about 70 CNY/ton, but the premium gap widened to 181 CNY/ton, suggesting that imported cotton is more favored in terms of quality and cost-effectiveness. This reflects the linkage between international cotton prices and domestic supply-demand dynamics—imported cotton, with its stable supply and relatively lower basis, has become an important tool for mills to lock in prices.

Cumulatively, since July 20, Xinjiang cotton has averaged 16,978 CNY/ton, while imported cotton has averaged 17,393 CNY/ton, a gap of 415 CNY/ton. This gap was compressed in the weekly data, indicating either rising import costs or stronger domestic demand for high-grade cotton. For buyers, this means the temporary advantage of imported cotton is narrowing, and attention should be paid to the trend of the domestic-international price spread.

Regional Demand and Industrial Transmission

The regional distribution of this week's transactions reveals the concentration of downstream demand. Shandong, Hubei, and Jiangsu provinces together accounted for 21,000 tons, or 52.34% of the weekly total. Shandong, a major cotton textile province, has rigid demand for cotton due to its yarn production capacity and home textile industry clusters; Hubei and Jiangsu are known for grey fabric and fabric processing, respectively. The fact that three provinces account for over half of the transactions indicates that reserve cotton flows are highly concentrated in traditional textile hubs, where changes in operating rates directly affect cotton consumption.

The coexistence of high clearance rates and high premiums implies that mills are not passively accepting supplies but actively bidding. This is driven by low raw material inventories and order delivery pressure. Mills currently maintain low inventory strategies, making reserve cotton a stable source and its price a market anchor. When reserve cotton transaction prices rise, spot markets often follow, and vice versa. Therefore, the pace of reserve cotton sales has become an important barometer for short-term cotton price fluctuations.

Supply-Side Dominant Logic

The consecutive full clearance of reserve cotton essentially reflects the strong guiding role of supply on market sentiment. Before the new cotton crop arrives, reserve cotton is the most important supplementary channel, with its sales volume and transaction prices directly shaping mills' cost expectations. This week's premium narrowed compared to the cumulative value (1,434 CNY/ton), but weekly prices remained high, indicating that concerns about future supply have not dissipated.

For factories, locking in raw material costs at current levels is a reasonable choice, but they should be wary of high-level correction risks. As the new cotton purchase season approaches, market focus will shift to the opening price and output expectations of new cotton. If new cotton supply is ample, the premium space for reserve cotton may be compressed; otherwise, it may continue to support cotton prices. Therefore, reserve cotton transaction data in the coming weeks will be a key leading indicator for the new cotton market.

Practical Recommendations

For Buyers - Monitor weekly changes in reserve cotton average prices and premiums. If they narrow for two consecutive weeks, consider slowing purchase pace and wait for new cotton pricing clarity. - When the price gap between imported and Xinjiang cotton narrows, prioritize the more cost-effective option and use futures to hedge price volatility.

For Foreign Trade Enterprises - Use the average reserve cotton transaction price as a benchmark for cost estimation when taking orders, and reserve some flexibility to avoid margin erosion from rising raw material costs. - Track transaction dynamics in major sales regions such as Shandong, Hubei, and Jiangsu, as demand changes there often signal the health of export orders.