Reserve Cotton Sales: Weekly Average Price Up 2.8%, Narrowing Xinjiang-Import Spread Signals Market Shift

During the week of August 24-28, reserve cotton auctions achieved a 100% turnover rate, with the weekly average price reaching 17,463 yuan/ton, up approximately 2.8% from the previous week's 16,981 yuan/ton. The price converted to grade 3128 was 18,172 yuan/ton, with an average premium of 1,184 yuan/ton. This price level has risen for three consecutive weeks, with premiums remaining above 1,000 yuan, indicating that spinners' restocking appetite has not faded despite higher prices.

Market Signals

Notably, the weekly average price gap between Xinjiang cotton and imported cotton narrowed to just 69 yuan/ton (17,413 vs. 17,482 yuan/ton). At the start of the sales on July 20, the spread was 415 yuan/ton, with imported cotton commanding a clear premium. The narrowing spread suggests that the cost advantage of imported cotton has weakened, prompting spinners to shift toward domestic cotton under quota constraints. It also reflects growing recognition of Xinjiang cotton's quality stability, enhancing its substitution effect. For buyers, this means pricing dynamics will increasingly hinge on domestic supply-demand rather than external market fluctuations.

Cumulative data from July 20 to August 28 show that total reserve cotton offered reached 240,683.76 tons, all sold, with an average price of 17,264 yuan/ton (18,048 yuan/ton converted to grade 3128) and an average premium of 1,434 yuan/ton. Xinjiang cotton averaged 16,978 yuan/ton, while imported cotton averaged 17,393 yuan/ton, yielding a cumulative spread of 415 yuan/ton—far wider than the weekly spread, indicating a rapid compression of imported cotton's premium. This shift correlates with recent declines in international cotton prices, RMB exchange rate movements, and quota release schedules. More fundamentally, it reflects changes in downstream order structures: a rising share of high-count yarn production has increased reliance on Xinjiang cotton.

Industry Impact

Provincial transaction data reveal demand geography: Shandong, Hubei, and Jiangsu together accounted for 2.1 million tons (52.34% of the weekly total). Shandong's leading share underscores its high-capacity utilization in cotton spinning; Hubei and Jiangsu benefit from recovering home textile and apparel orders. This regional concentration has direct implications for logistics and warehousing—reserve cotton is mainly shipped to the middle and lower Yangtze region and the Jiaodong Peninsula, making cotton yarn quotations in these areas more sensitive to reserve release pacing.

For upstream ginners, the reserve cotton transaction price is currently higher than spot market levels (around 17,000 yuan/ton), providing an anchor for new-season seed cotton pricing. If reserve sales continue through late September with high turnover, new cotton opening prices may start high. However, spinners should be cautious: the current premium has fallen by 250 yuan/ton from the 1,434 yuan/ton seen in early July, indicating cooling speculative fervor. Should release volumes increase or downstream orders weaken, the risk of price corrections will accumulate.

Practical Recommendations

For Buyers - Monitor the spread between weekly average transaction price and 3128-converted price; if it exceeds 1,500 yuan/ton, consider slowing bidding and waiting for policy windows. - When the Xinjiang-import spread is below 100 yuan/ton, prioritize bidding on Xinjiang cotton to reduce quota consumption and logistics costs. - Align bidding strategy with yarn count structure: for high-count yarn, increase Xinjiang cotton lock-in; for low-count yarn, watch for opportunistic imported cotton purchases.

For Foreign Trade Companies - Rising reserve cotton prices will push up domestic cotton yarn costs; lock in exchange rates and raw material costs in export quotes to avoid margin erosion. - Track transaction dynamics in Shandong, Hubei, and Jiangsu; price fluctuations in these regions will influence Southeast Asian clients' price comparisons—adjust FOB quotes accordingly. - If reserve releases increase before the new cotton season, cotton prices may dip short-term; consider delaying order signing to capture a better cost window.