Price trend
During the National Day holiday, the market lacked support, the demand side performed weakly, and the enthusiasm of downstream companies to replenish stocks was dampened. Cotton prices fell compared with before the holiday. According to the commodity market analysis system of SunSirs, as of October 11, the spot price of 3128B grade cotton lint was 14,792 RMB/ton, down 0.65% from before the holiday.
Analysis review
On the macro level: The National Development and Reform Commission (NDRC) had released the "Detailed Rules for Application and Arrangement of Cotton Import Tariff-Rate Quotas for 2026." The total cotton import tariff quota for 2026 is 894,000 tons, of which 33% is allocated to state-owned trade. Quotas are not restricted to specific trade methods and are determined independently by enterprises. Compared to previous years' regulations, the new 2026 regulations adjust and optimize the quota application, allocation mechanism, and management model. These measures include automatic quota allocation based on the previous year's actual import volume and the ability to apply multiple times within the same year for immediate use. These measures further enhance the convenience and predictability of quota application, policy transparency, and flexibility in quota allocation.
On the cost side: Due to the cooler temperatures and rainy weather during the National Day holiday, the new cotton harvest in Xinjiang was delayed, but not as planned. Furthermore, the high moisture content of seed cotton in the early stages of the harvest slowed the harvest slightly, leading to a cautious purchasing process at cotton gins. This year's seed cotton purchase price had fallen slightly compared to last year. However, the purchase price of machine-picked cotton had recently shown a sustained upward trend. In Aksu and Bayingol Prefecture in southern Xinjiang and northern Xinjiang, the purchase price of machine-picked cotton continued to rise, with the average daily purchase price exceeding 6.25 RMB/kg in some areas. Ginning mills that had already processed cotton had begun selling new cotton, mostly at a fixed price, with prices priced around 14,300-14,400 RMB/ton. The new cotton that has been shipped showed generally good quality, with length and strength exceeding 29 mm. Prices for double-30 new cotton were around 14,500-14,700 RMB/ton.
Internationally, ICE US cotton futures prices fluctuated downward during the National Day holiday, with the international market still constrained by subdued demand prospects and strong supply. The ongoing US federal government shutdown and the failure of the USDA to release its supply and demand forecast as scheduled continued to weigh on market sentiment. Combined with the negative impact of the broader commodity market decline, ICE cotton futures prices continued to decline, with the settlement price of the main December contract falling below 64 cents. As of the 10th, the December ICE cotton contract settled at 63.84 cents, down 1.93 cents, or 2.93%, from pre-holiday levels. However, the cotton market continued its downward trend last week, impacted by increasing pressure from the US new cotton harvest, the US government shutdown, and unfavorable external markets. A small short-term rebound may be possible after this round of decline.
On the demand side, the market peak season effect was not significant. During the holiday period, due to reduced liquidity in some downstream industries due to holidays, yarn mills were relatively slow to sell goods, and yarn prices continued to fall overall. With falling raw material prices, yarn mills generally lowered prices by around 100-200 RMB/ton to boost sales. However, the continued decline in yarn prices was squeezing companies' profits and increasing operating pressure. As of October 10th, textile mills in major regions were operating at 65.4%, a decrease of 1.80% from the previous week. Due to limited orders before and during the National Day holiday, some textile mills in mainland China reduced or even shut down production. Mainland China's operating rates were 50-60%, while those in Xinjiang remained at around 90%.
Market outlook
On the supply side, the domestic cotton harvest is in sight, and the expected increase in supply after the new cotton arrives is putting downward pressure on prices. On the demand side, downstream demand during the peak season of September and October has fallen short of expectations, with new orders increasing only slightly. Cotton prices are expected to remain volatile in October, and the outlook remains sensitive to the arrival of new cotton and downstream orders.
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