In the final week of August, the average price of reserve cotton sales settled at 17,463 yuan/ton, slightly higher than the previous week, while the turnover rate remained at a full 100%. Since the launch of this round of releases on July 20, cumulative sales have reached 240,683 tons, all sold without a single failed lot. Behind this data lies a strong restocking willingness among textile enterprises, or perhaps a certain expectation of future cotton prices?
Background
The current round of reserve cotton releases started on July 20 and has maintained a 100% turnover rate for six consecutive weeks through August 28. Weekly data shows that from August 24-28, 40,100 tons were listed and all sold, with an average premium of 1,184 yuan/ton and a discounted 3128 price of 18,172 yuan/ton. Among them, Xinjiang cotton averaged 17,413 yuan/ton with a premium of 1,051 yuan, while imported cotton averaged 17,482 yuan/ton with a premium of 1,232 yuan. The higher premium for imported cotton reflects a market preference for higher-grade fiber.
Cumulative data indicates that Xinjiang cotton averaged 16,978 yuan/ton, imported cotton 17,393 yuan/ton, with imported cotton commanding a cumulative premium of 415 yuan/ton over Xinjiang cotton. This price structure implies that for high-count yarn or export orders, imported cotton offers better cost-performance, also highlighting a structural shortage of high-grade domestic cotton.
Industry Impact
The sustained full turnover is most directly attributed to low inventory levels among textile mills. Earlier price fluctuations and weak downstream orders led most enterprises to adopt a hand-to-mouth purchasing strategy, resulting in generally low raw material stocks. As the traditional peak season approaches, mills are compelled to restock, and reserve cotton's price advantage and quality stability make it the preferred choice.
Regional distribution of buyers shows that Shandong, Hubei, and Jiangsu together accounted for 21,000 tons, or 52.34% of the weekly total. These provinces are concentrated textile production bases, especially Shandong and Jiangsu, which host numerous cotton spinning enterprises. This regional concentration indicates that restocking demand is not widespread but focused in areas with mature industrial chains and relatively stable orders, also implying that operating rates in these regions may be above the national average.
The change in premium levels deserves attention. The weekly average premium of 1,184 yuan/ton has narrowed from the 1,434 yuan/ton seen in early July, but remains at a high absolute level. The narrowing premium may suggest more rational bidding, yet the 100% turnover still indicates rigid demand. Combined, these factors suggest strong support for cotton prices at current levels, but upside is constrained by downstream acceptance.
Practical Recommendations
For Purchasers - Monitor the pace of reserve releases; if weekly volumes remain around 40,000 tons, consider building positions in batches to avoid cost spikes from concentrated bidding. - With the price gap between imported and Xinjiang cotton at 415 yuan/ton, prioritize imported cotton resources if product specifications allow, to improve raw material consistency. - Align with order cycles and use the window of narrowing premiums to moderately increase inventory, guarding against pre-season price rebounds.
For Foreign Trade Enterprises - For export orders requiring U.S. or Australian cotton traceability, imported cotton from reserves can serve as a compliant source, but verify batch origin certificates. - Monitor RMB exchange rate fluctuations affecting actual costs of imported cotton; consider locking exchange rates or raw material prices when signing forward orders. - Use reserve cotton transaction data as a price negotiation reference to secure more favorable purchasing terms from suppliers, especially during high-price volatility.
Overall, the full turnover of reserve cotton is a microcosm of the current cotton market: supply is underpinned by reserves, demand is supported by peak season expectations, but the sustainability of downstream orders remains the biggest variable. Textile enterprises must strike a balance between restocking and risk control to avoid falling into a passive situation of excessive inventory due to over-optimism.