Domestic cotton prices strengthened overall last week, driven primarily by persistent drought conditions in Xinjiang; growing market concerns regarding reduced output fueled a strong rebound in prices. However, the ongoing release of state cotton reserves into the market capped the upside potential for prices. According to data from the SunSirs commodity market analysis system, the spot price for domestic Grade 3128B lint cotton stood at 17,952 RMB/ton as of August 10, marking a weekly increase of 2.93%.
Cotton in Xinjiang is currently in the stage ranging from peak flowering to boll expansion—a critical growth period for yield formation. From August 3 to 6, many areas in Turpan, Hami, and southern Bayingolin (Bazhou) experienced high temperatures exceeding 40°C, with some localities even surpassing 45°C. This extreme heat coincided with a crucial window in the cotton's development, further heightening the risk of boll shedding and intensifying market concerns regarding a potential decline in yield per unit area.
Regarding the trading of cotton reserves, a total of 40,100 tonnes were offered for sale during the week of August 3-7; all lots were sold, resulting in a 100% transaction rate. The average transaction price for the week was 17,014 RMB/ton (equivalent to 17,663 RMB/ton for Grade 3128B cotton), with an average price premium of 1,497 RMB/ton. As of August 7, the cumulative volume of cotton reserves sold in this round totaled 120,259.4250 tonnes, maintaining a 100% transaction rate; the cumulative average transaction price was 17,173.33 RMB/ton (equivalent to 17,801.48 RMB/ton for Grade 3128B cotton).
In the downstream textile sector, the market remains in a distinct off-season slump; end-market orders are sluggish, and downstream buyers are adopting a cautious approach. Against this backdrop, yarn manufacturers are prioritizing inventory reduction, with pricing strategies focused on maintaining stability or testing slight increases to encourage traders and weaving mills to replenish stocks. Sales efforts are concentrated on standard medium-count carded, combed, and compact-spun yarn series. However, as the rise in raw cotton prices has outpaced that of yarn prices, processing margins for textile mills are being continuously squeezed, leading to mounting operational pressure. Faced with narrowing margins, enterprises are less willing to accept high-priced raw materials; they are largely adopting a "wait-and-see" attitude regarding price-fixing purchases and are proactively scaling back inventory replenishment. To alleviate cost pressures, some small and medium-sized yarn mills are actively adjusting their raw material mix and increasing their participation in auctions for state-reserve cotton—which offers a favorable price-performance ratio—in an effort to lower their overall cotton procurement costs.
Overall, the textile market remains in a seasonal lull with no signs of improvement. Moving forward, it is essential to closely monitor how weather conditions in August materially impact the yield per unit area of new cotton, as well as the price trends of state-reserve cotton auctions, in order to assess the market's future direction.
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