Price trend:

Market expectations of a significant decrease in cotton planting area in Xinjiang next year, coupled with other positive factors, led to a continued upward trend in domestic cotton prices last week. According to SunSirs' commodity price analysis system, as of January 5th, the spot price of 3128B grade lint cotton was 15,603 RMB/ton, a 0.4% increase compared to the previous Monday.

Market Analysis

Domestic cotton market prices fluctuated within a stronger trend, with divergent trends between domestic and international cotton prices, leading to a widening price gap. Supply increased. As of January 2, 2025, total commercial cotton inventory reached 5.2888 million tons, an increase of 123,800 tons compared to the previous week. With rising cotton prices, downstream textile companies faced significantly increased costs and were relatively cautious in replenishing stocks, leading to increased pressure on traders to sell.

Influenced by the continued rebound of the ULLAR and the general decline in external markets such as US stocks, energy, and agricultural products, ICE cotton futures generally trended downwards. The average weekly settlement price of the ICE cotton futures main contract was 64.24 cents/pound, a slight increase of 0.29 cents/pound from the previous week, representing a 0.5% increase.

Following the sharp increase in cotton prices, textile companies also significantly raised cotton yarn prices. However, textile companies showed limited acceptance of these higher prices and weak willingness to replenish their inventories, leading to a continued decline in raw material stocks.  Domestic textile companies maintained a relatively high operating rate. The recent rise in cotton prices had given companies with large cotton reserves a cost advantage, while companies that purchased cotton as needed faced significant price increases, making their operations more challenging.

Market Outlook

Cotton sales were progressing faster than last year, and expectations of a reduction in cotton planting area in Xinjiang by 2026 were strengthening, leading to a significant boost in cotton prices due to anticipated supply contraction. Downstream cotton yarn prices still have some room for increase based on cotton price fluctuations, but rising market risk aversion is expected to limit the volatility of cotton prices.

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