Reserve cotton bidding maintained its strong momentum in the final week of August, with the weekly average price reaching 17,463 yuan per ton, equivalent to 18,172 yuan per ton on the 3128 standard grade, and an average premium of 1,184 yuan per ton. This price level is notably higher than the previous week's average of 17,264 yuan, but the premium narrowed from 1,434 yuan, indicating that mills are becoming more cautious about chasing high prices. The elevated raw material costs are testing downstream affordability.
Market Background
The reserve cotton release initiated on July 20 has seen cumulative sales of 240,000 tons through August 28, with a 100% transaction rate. Weekly data shows that from August 24 to 28, 40,100 tons were offered and fully sold, with Xinjiang cotton averaging 17,413 yuan per ton and imported cotton at 17,482 yuan per ton, a narrow gap of 69 yuan, but the 3128-equivalent spread widened to 181 yuan. This structural difference reflects a growing divergence in market recognition of different cotton grades.
Over a longer period, the cumulative average price is 17,264 yuan per ton, equivalent to 17,911 yuan on the 3128 basis, with an average premium of 1,434 yuan. Comparing weekly data, the premium narrowed by 250 yuan, indicating a cooling of bidding intensity. Xinjiang cotton has seen a cumulative premium of 1,147 yuan, while imported cotton has reached 1,562 yuan, maintaining a clear premium advantage, closely linked to international price trends and exchange rate fluctuations.
Industry Impact
The regional distribution of winning bidders reveals key signals: Shandong, Hubei, and Jiangsu collectively purchased 21,000 tons, accounting for 52.34% of the weekly total. Shandong, a major cotton textile province, shows that order support remains for weaving enterprises; the active participation of Hubei and Jiangsu points to demand resilience in home textiles and high-count yarn sectors. The fact that mills maintain full-capacity bidding at high prices suggests their raw material inventories are relatively low, creating rigid restocking demand.
However, the combination of narrowing premiums and rising average prices implies divergence in market expectations for future cotton prices. For mills, current procurement costs have exceeded the breakeven point for some conventional yarn varieties; if downstream order prices cannot transmit costs, profit margins will be further squeezed. Although the continuous release of reserve cotton alleviates supply pressure, it does not change the overall tight supply-demand balance.
It is worth noting that the 3128-equivalent price spread for imported cotton remains higher than that for Xinjiang cotton, which may guide some mills to adjust their cotton mix and increase the proportion of domestic cotton. Meanwhile, international price volatility and RMB exchange rate changes will directly affect the landed cost of imported cotton in the coming weeks, influencing the bidding intensity in reserve sales.