Reserve cotton sales for the week of Aug 24-28 saw a 100% clearance rate, with an average price of 17,463 yuan/ton and a premium of 1,184 yuan/ton. This marks the sixth consecutive week of full clearance, signaling not merely a cotton shortage but an intensifying scramble for high-quality fiber among textile mills.
Background
Since the start of the reserve sales on July 20 through Aug 28, cumulative listings and transactions both reached 240,683.76 tons, a 100% clearance rate, with an average price of 17,264 yuan/ton and an average premium of 1,434 yuan/ton. Xinjiang cotton averaged 16,978 yuan/ton with a premium of 1,147 yuan/ton, while imported cotton averaged 17,393 yuan/ton with a higher premium of 1,562 yuan/ton, reflecting a clear preference for superior grades and spinability.
By province, Shandong, Hubei, and Jiangsu collectively accounted for 2.1 tons, or 52.34% of the week's total volume. These provinces are textile powerhouses with numerous small and medium-sized spinning mills, indicating robust operating rates and increased reliance on reserve cotton.
Industry Impact
The full clearance and sustained premiums suggest that mills hold bullish price expectations, particularly concerning supply gaps before the new crop arrives. Despite compressed spinning margins, mills are willing to bid at premiums, demonstrating firm order books and an aversion to downtime due to raw material shortages.
The persistently higher premium for imported cotton over Xinjiang cotton points to a structural shortage of high-grade domestic fiber. For mills specializing in medium-to-high count yarns, imported cotton offers clear cost-performance advantages, likely accelerating quota usage and reshaping procurement strategies.
From a price transmission perspective, reserve cotton prices have remained firmly above 17,000 yuan/ton for weeks, with the 3128-equivalent approaching 18,000 yuan/ton, providing strong support to the spot market. If the new crop is delayed or quality disappoints, prices may stay elevated, transmitting pressure to yarn and fabric prices.
For textile enterprises, the high clearance rate is a double-edged sword: it secures near-term supply but also borrows from future demand. As the sales program enters its later phase, remaining lots may decline in quality, prompting mills to adjust procurement structures and reduce over-reliance on reserves.