On August 31, reserve cotton sales closed with a 100% turnover rate, but the average price of 17,568.87 CNY/ton fell 19.4 CNY from the previous session, equivalent to 18,214.34 CNY/ton on a 3128B basis. This marks another day of full turnover, bringing cumulative sales to 248,685 tons at an average of 17,273.77 CNY/ton. The subtle divergence between volume and price sends a signal: mills remain eager to restock, but their tolerance for high prices is beginning to show cracks.
Market Background
The reserve sales program, launched in August, offered 8,001.663 tons on this day, all of which were sold. Prices ranged from a high of 18,150 to a low of 17,090 CNY/ton, a spread exceeding 1,000 CNY. Imported cotton averaged 17,556.01 CNY/ton with a premium of 970.89 CNY, while Xinjiang cotton averaged 17,653.30 CNY/ton with a premium of 1,087.75 CNY. The higher premium for Xinjiang cotton indicates growing preference for domestic high-grade fiber amid shifts toward finer yarn counts.
Cumulative data through August 31 show imported cotton averaging 17,399.18 CNY/ton with a premium of 1,538.71 CNY, while Xinjiang cotton averaged 16,987.19 CNY/ton with a premium of 1,146.52 CNY. The reversal in daily premiums—Xinjiang outperforming imported—suggests changing supply dynamics: import quotas are tightening, while domestic cotton flows more smoothly, prompting buyers to recalibrate their procurement mix.
Industry Impact
The 100% turnover reflects genuine restocking demand. With yarn inventories at moderate lows and order deliveries pending, mills must secure raw materials. However, the slight price dip and the widening high-low spread (1,060 CNY) indicate that some enterprises are setting price ceilings, reducing their willingness to chase higher prices. If this caution spreads, it could dampen future bidding premiums and pressure Zhengzhou Cotton Futures.
For ginners and traders, the full turnover provides a price floor, but narrowing premiums signal that the window for price increases before the new crop arrives is closing. The higher daily premium for Xinjiang cotton may attract more resources to reserve auctions, alleviating selling pressure during the new harvest season. However, the cumulative average price is close to spot levels, leaving limited hedging room, so traders must monitor basis fluctuations closely.
For downstream weaving and apparel, high cotton prices directly raise fabric costs. Based on the 3128B equivalent of 18,214 CNY/ton, the cost of 32-count pure cotton yarn has increased by roughly 300 CNY/ton month-on-month, squeezing margins as grey fabric prices struggle to keep up. In foreign trade, overseas buyers resist price hikes, and some orders are shifting to Southeast Asia, forcing domestic mills to carefully calculate exchange rates and raw material costs when accepting new orders.