In the last week of August, reserve cotton auctions continued the full-transaction momentum seen since late July. The weekly average price reached 17,463 yuan/ton, up about 200 yuan from the previous week, equivalent to 18,172 yuan/ton for Grade 3128, with an average premium of 1,184 yuan. These figures indicate that textile mills' reliance on policy cotton has not weakened despite the approaching new crop, and they are responding with more aggressive bids.
Supply-Demand Dynamics Behind the Bidding Heat
From July 20 to August 28, cumulative reserve cotton sales totaled 240,683.76 tons, all transacted, with an average price of 17,264 yuan/ton and an average premium of 1,434 yuan. Imported cotton averaged 17,393 yuan/ton with a premium of 1,562 yuan, notably higher than Xinjiang cotton's 1,147 yuan. The premium gap between imported and Xinjiang cotton widened from 181 yuan in the week to 415 yuan over the full period, underscoring a structural shortage of high-grade cotton and a market preference for imported quality.
Regionally, Shandong, Hubei, and Jiangsu combined for 21,000 tons, representing 52.34% of weekly volume. These provinces host major textile clusters; their concentrated purchasing reflects downstream order resilience, particularly in home textiles and garment fabrics.
Price Transmission and Industry Impact
The weekly average price uptick raises raw material costs for mills. At the 3128-equivalent of 18,172 yuan/ton, each ton of yarn now carries about 200 yuan more in cotton cost. Unless yarn prices rise in tandem, mill margins face compression. Yet mills continue to bid over a thousand yuan above base prices, suggesting order delivery pressures outweigh cost concerns, supporting near-term operating rates.
For traders, sustained high transaction rates reduce available high-grade cotton in the spot market, likely keeping spot quotes firm. Meanwhile, the widening premium for imported cotton implies narrowing international-domestic price spreads, making imports less cost-effective and potentially shifting demand toward Xinjiang or inland cotton, though quality substitution remains limited.
Outlook and Risks
With the new crop expected around late September, reserve sales may adjust, but the current 100% transaction rate indicates mills do not hold ample inventories. If new crop arrivals are delayed or quality disappoints, auction heat could persist. However, watch downstream demand—if orders seasonally decline in September, acceptance of high-priced cotton may wane, narrowing premiums.