In the week ending August 28, reserve cotton sales again cleared at 100%, but the average premium narrowed to 1,184 yuan/ton, down 250 yuan/ton from the cumulative average of 1,434 yuan/ton since July 20. This contrast deserves attention: demand remains firm, but mills are becoming more rational, shifting from panic buying to measured restocking.
Market Background
From August 24-28, 40,100 tons of reserve cotton were offered and fully sold, with an average price of 17,463 yuan/ton (equivalent to 18,172 yuan/ton for Grade 3128). Xinjiang cotton averaged 17,413 yuan/ton with a premium of 1,051 yuan/ton, while imported cotton averaged 17,482 yuan/ton with a premium of 1,232 yuan/ton. Since the program began on July 20, cumulative sales have reached 240,683.76 tons, all cleared, with an average price of 17,264 yuan/ton.
Imported cotton commanded a higher premium than Xinjiang cotton by 181 yuan/ton, and the cumulative gap reached 415 yuan/ton, indicating its continued appeal in quality and value. Regional data show Shandong, Hubei, and Jiangsu together purchased 21,000 tons, accounting for 52.34% of the weekly total, reflecting robust production activity in these textile provinces.
Industry Impact
The narrowing premium does not signal weaker demand but rather a consensus on price ceilings. With international cotton prices high and the new crop approaching, reserve cotton serves as a price anchor. The 3128-equivalent price of 18,172 yuan/ton sits at a discount to spot, allowing mills to lock in low-cost raw materials without fueling further price spikes.
For textile mills, the 100% clearance underscores underlying demand, but the reduced premium highlights squeezed margins. Yarn prices have struggled to keep up, and fabric pricing lags, forcing midstream players to be more cost-conscious. The concentrated purchases in Shandong, Hubei, and Jiangsu suggest high capacity utilization in these regions, while other provinces may be holding back due to weaker orders or ample inventories.