The final week of August saw reserve cotton sales fully absorbed, yet the underlying signals are more nuanced than the headline suggests. Weekly sales of 40,100 tons all transacted, with an average price of 17,463 yuan/ton, equivalent to 18,172 yuan/ton on the 3128 standard, and an average premium of 1,184 yuan/ton—roughly 17% narrower than the cumulative average of 1,434 yuan/ton since the program began on July 20. While the take-up rate remained at 100%, the shrinking premium indicates mills are still restocking as needed but with markedly reduced appetite for chasing higher prices.
Background
The reserve sales program, initiated on July 20, had cumulatively offered 240,683.76 tons through August 28, all transacted, at an average price of 17,264 yuan/ton (18,048 yuan/ton on the 3128 basis), with an average premium of 1,434 yuan/ton. By category, Xinjiang cotton averaged 16,978 yuan/ton with a premium of 1,147 yuan/ton, while imported cotton averaged 17,393 yuan/ton with a premium of 1,562 yuan/ton. The persistent higher premium for imported cotton underscores a stable preference for higher-grade foreign fiber.
On a weekly basis, Xinjiang cotton averaged 17,413 yuan/ton and imported cotton 17,482 yuan/ton, narrowing the price gap to just 69 yuan/ton—far below the cumulative spread of 415 yuan/ton. This shift implies greater substitutability between domestic and imported cotton in the short term, reflecting mills' flexibility in fiber blending and a rising sensitivity to raw material costs amid tight spinning margins.
Industry Impact
The combination of a 100% take-up rate with a shrinking premium is unusual in the history of reserve sales. It points to a key insight: mill inventories have moved from "scarce" to "balanced," and purchasing has shifted from panic buying to price-selective restocking. For ginners and traders, this means pricing power is eroding ahead of the new crop, and the risk-reward of hoarding cotton is no longer favorable.
Geographically, Shandong, Hubei, and Jiangsu together accounted for 52.34% of weekly transactions (21,000 tons). Shandong's strong purchasing reflects order conditions in the coastal textile cluster; Hubei and Jiangsu's participation indicates broader support from domestic demand. However, high regional concentration also implies that if operating rates in these provinces falter, the pace of reserve depletion could slow.
For downstream fabric and apparel makers, the continuous reserve supply effectively caps cotton price upside—as long as sales continue, spot prices are unlikely to surge. This provides a stable anchor for autumn/winter order costing but also limits mills' ability to pass on higher costs. Profit repair in spinning must come from efficiency gains rather than market tailwinds.