SunSirs: Cotton prices Rose Slightly under the Favorable Adjustment of China-US Tariffs

Last week, the high-level economic and trade talks between China and the United States made substantial progress. China and the United States will simultaneously cancel 91% of tariffs and suspend the implementation of 24% "reciprocal tariffs". The talks have achieved substantial results, better than expected, and sent a positive signal to the market, which boosted domestic cotton prices.

According to the commodity market analysis system of SunSirs, as of May 19, the spot price of 3128B grade cotton was 14,551 RMB/ton, with a weekly increase of 2.47%, up 2.41% from the beginning of the month.

Domestic:

Macro: Last week, the Sino-US Geneva economic and trade talks announced that both sides will cancel 91% of the tariffs imposed after April 2, retain 10%, and suspend the implementation of 24% for 90 days. The results of the talks exceeded market expectations, and the optimism in the domestic financial and commodity markets quickly heated up. The price trend of Zheng cotton futures was strong, rising to 13,480 RMB/ton, breaking the highest point in a month, and the spot price followed the rise.

On the supply side: The survey results of the China Cotton Association show that it is expected that the national cotton planting area will be 44.823 million mu in 2025, an increase of 1.8% year-on-year, an increase of 1.4 percentage points from the previous period, of which Xinjiang will have 40.9 million mu, an increase of 3.3% year-on-year, an increase of 1.5 percentage points from the previous period. As the temperature in Xinjiang continues to rise, most cotton fields have sprouted.

According to data released by the General Administration of Customs, China's cotton imports in April were about 60,000 tons, a year-on-year decrease of 82.2%, a slight increase from the decline in March (a year-on-year decrease of 81.42% in March). From January to April 2025, my country's cumulative cotton imports were about 400,000 tons, a year-on-year decrease of 71.1%.

On the demand side: driven by costs, cotton yarn prices are on the rise. At present, textile enterprises are in good shipment condition, mainly delivering ordered goods. However, there has been no significant change in the subsequent new orders, and the downstream market is in a wait-and-see mood. The load of textile enterprises has increased slightly, but it is still lower than the same period last year. During the off-season cycle, the demand side has limited support.

Internationally:

The U.S. Department of Agriculture's monthly forecast for global cotton supply and demand shows that global cotton production is forecast to be 25.651 million tons in May, a year-on-year decrease of 710,000 tons. However, as the increase in initial inventory exceeds the decline in production, in 2025/26, global cotton supply will increase by about 1.5% from the previous year, and consumption will increase by 1.2% to 25.709 million tons. End-of-period inventory is basically the same as in 2024/25, at 17.066 million tons. U.S. cotton production is expected to be 3.157 million tons, slightly higher than 3.1375 million tons in 2024/25. Exports are expected to rebound to 2.7216 million tons, higher than 2.4168 million tons in the previous year, and end-of-period inventory is 1.132 million tons, an increase of 87,000 tons from the previous year, with an inventory-to-consumption ratio of 36.6%.

Market Forecast:

The recent market focus is still more on the macro aspect. Overall, the easing of Sino-US trade has given the market some confidence, and the macro will boost cotton prices, but the uncertainty of the tariff storm is still large, and the subsequent trade policy will still affect the market. Domestically, the policies to stabilize growth and promote consumption have been implemented, and the lack of demand may improve. We need to continue to pay attention to the implementation of policies.

From the current domestic cotton inventory and the planting expectations for the next season, there is a lack of obvious positive support. With the arrival of the traditional off-season of the industry, market demand will gradually weaken. Under the dual influence of insufficient demand and relatively abundant supply, it is expected that short-term prices will be stagnant. The market still needs to pay attention to the changes in fundamentals after entering the off-season.

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