Reserve Cotton Auction Heat Persists: Full Clearance and Premium Trends Signal Spinners' Restocking Mood

Reserve cotton auctions have maintained a 100% clearance rate for six consecutive weeks. During the week of August 24-28, all 40,100 tons offered were sold, with an average price of 17,463 yuan/ton, equivalent to 18,172 yuan/ton for Grade 3128, and an average premium of 1,184 yuan/ton. Although the premium has narrowed slightly from early July, it remains historically high, indicating that spinners' reliance on policy-driven supply has not diminished.

Background

The current reserve cotton release started on July 20. As of August 28, cumulative listings and transactions both reached 240,683.76 tons, with a full clearance rate. The cumulative average price stood at 17,264 yuan/ton, equivalent to 17,911 yuan/ton for Grade 3128, with 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 premium of 1,562 yuan/ton. The higher premium for imported cotton underscores the urgent demand for high-grade foreign fiber.

In the weekly data, Xinjiang cotton averaged 17,413 yuan/ton (18,039 yuan/ton for Grade 3128) with a premium of 1,051 yuan/ton, while imported cotton averaged 17,482 yuan/ton (18,220 yuan/ton for Grade 3128) with a premium of 1,232 yuan/ton. The price gap between imported and Xinjiang cotton narrowed from 415 yuan/ton cumulatively to just 69 yuan/ton weekly, suggesting improved quality perception of Xinjiang cotton or changes in quota usage.

Industry Impact

Provincial transaction data show that Shandong, Hubei, and Jiangsu ranked top three, accounting for 21,000 tons or 52.34% of the weekly total. This concentration indicates that restocking demand from textile clusters in the Yellow River plain and middle-lower Yangtze region is the main driver of reserve cotton depletion. Shandong's leading share aligns with the improving cash flow and order recovery of small and medium-sized spinning mills in the province.

The high premium is not merely a price signal. From a buyer's perspective, reserve cotton still offers a cost advantage, especially during the pre-harvest window, allowing mills to secure stable supply and hedge against spot market volatility. For traders, the discount between reserve average prices and Grade 3128 equivalent provides a benchmark for hedging operations. Notably, the cumulative premium expanded to 1,434 yuan/ton from the weekly 1,184 yuan/ton, indicating that bidding heat has not cooled despite increased volumes.

Practical Recommendations

For Procurement Managers - Monitor the pace of reserve auctions; if premiums remain above 1,200 yuan/ton, consider phased purchases to smooth costs. - Prioritize imported cotton sessions, as their higher premiums still result in lower Grade 3128 equivalent prices compared to spot resources, suitable for high-count yarn production.

For Foreign Trade Enterprises - Use reserve cotton transaction prices as anchors for forward quotations; the current 18,000 yuan/ton Grade 3128 equivalent can serve as a lower-bound cost estimate. - Closely track transaction dynamics in Shandong, Hubei, and Jiangsu, as price movements in these regions often lead national cotton yarn quotations.