Reserve cotton auctions have maintained a 100% transaction rate for several consecutive weeks, with the average weekly price in the last week of August reaching 17,463 yuan/ton, nearly 200 yuan higher than the cumulative average. This upward price movement is not an isolated phenomenon but reflects the interplay between spinners' pre-season restocking demand and tight supply expectations. As the premium narrowed from the cumulative 1,434 yuan/ton to 1,184 yuan/ton for the week, the market needs to reassess the cost-effectiveness of these auctions and the transmission path of raw material costs.
Event Background
From August 24 to 28, reserve cotton sales totaled 40,100 tons, all transacted, with an average price of 17,463 yuan/ton (equivalent to 18,172 yuan/ton for grade 3128). Among them, Xinjiang cotton averaged 17,413 yuan/ton, while imported cotton averaged 17,482 yuan/ton, a spread of 69 yuan/ton, narrowing from the cumulative 415 yuan/ton. This tightening suggests that spinners' enthusiasm for imported cotton has cooled, though they still pay a premium for high-grade foreign fiber. Since the launch on July 20, cumulative sales reached 240,683.76 tons with a 100% transaction rate and an average premium of 1,434 yuan/ton, indicating sustained strong market absorption.
Regionally, Shandong, Hubei, and Jiangsu accounted for 21,000 tons, or 52.34% of the weekly total. Shandong, a major cotton textile province, reflects the order situation in coastal clusters; the activity in Hubei and Jiangsu underscores restocking demand in central and Yangtze River Delta mills. This regional concentration suggests that reserve cotton distribution closely aligns with downstream production capacity, rather than mere price arbitrage.
Industry Impact
The changes in transaction prices and premiums have direct implications for spinners' cost calculations. At the equivalent grade 3128 price, the weekly average of 18,172 yuan/ton exceeds spot market levels, meaning participating mills bear an additional premium. This stems from recognition of reserve cotton's stable quality and timely delivery, especially during the pre-harvest gap. However, the narrowing premium also hints that some enterprises are becoming cautious about high-priced raw materials and may switch to a wait-and-see approach.
The price structure between Xinjiang and imported cotton offers reference for arbitrage and substitution. The weekly spread of 181 yuan/ton (equivalent 3128) is smaller than the cumulative 441 yuan/ton, making imported cotton relatively more cost-effective. Yet mills have not shifted significantly, likely due to import quota constraints, delivery lead times, and trade uncertainties. For foreign trade-oriented enterprises, raw material cost fluctuations directly compress profit margins, necessitating more refined management of currency hedging and forward procurement.