SunSirs: Under Macro-favorable Conditions, Cotton Prices Rose Slightly in May

In May, cotton prices fell first and then rose. After the China-US talks made important progress in early May, the macro-trade environment improved, and cotton prices rebounded significantly. Subsequently, the demand side did not actually improve after the favorable digestion, suppressing the rise in cotton prices. According to the commodity market analysis system of Sino-US, as of May 28, the spot price of 3128B grade cotton was 14,580 RMB/ton, up 2.62% from the beginning of the month.

In terms of futures, the price of Zhengzhou cotton rebounded in May, once standing at 13,500 RMB/ton, and then tended to fluctuate in a narrow range. As of May 28, the settlement price of the main contract was 13,330 RMB/ton, up 4.26% from the beginning of the month; in terms of ICE cotton futures, the market fell first and then rose. As of May 27, the settlement price of the mai contract was 65.57 cents/pound, down 0.14% from the beginning of the month.

Domestic:

Macro: Although China and the United States have significantly suspended bilateral tariff levels and trade tensions have eased, concerns about tariff policies after 90 days continue to drag down the market, while weak US macro data suppresses market sentiment. Domestic policies continue to be released to benefit the economy, but the effect of hedging external pressures remains to be observed.

Supply: At present, new cotton in China is growing normally, and new cotton is expected to be abundant. The inventory of old cotton is at a low level in recent years, but there is no shortage worry in the short term. As of May 23, 2025, the total commercial cotton inventory was 3.4945 million tons, of which 2.5611 million tons were commercial cotton in Xinjiang and 454,200 tons were commercial cotton in the mainland. Although it has entered the off-season for consumption, the pace of cotton destocking in Xinjiang is still acceptable, but overall, the destocking pressure of cotton this year has been significantly alleviated.

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 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: the domestic cotton spinning industry has entered the off-season, with both production and sales sluggish, and the operating rate has declined, but there are still signs of improvement compared with last month. Last week, the suspension of Sino-US tariffs promoted the restart of export orders, but because it is currently in the traditional off-season and there are still concerns about the tariff policy after "90 days", the overall downstream order transactions are still flat and difficult to increase. The inventory of finished yarn products has increased slightly, and some small yarn mills with high finished product inventories may have limited production plans.

According to customs statistics, the export volume of cotton products (including cotton-containing blended products, not just pure cotton products, the same below) in April 2025 was 635,500 tons, an increase of 15.06% year-on-year and 7.24% month-on-month; the export volume of cotton products from January to April 2025 was 2.3308 million tons, an increase of 13.53% year-on-year. Among them, cotton products exported to the United States were 42,100 tons, a year-on-year decrease of 12.06% and a month-on-month decrease of 13.55%.

International: The overall drive is weak, and the disturbance is still more at the macro level. The latest contract data of US cotton has increased month-on-month, and the current progress of US cotton planting continues to be slow, which supports the international cotton price. As of the week of May 25, the cotton planting rate in the United States was 52%, compared with 57% in the same period last year, and the five-year average was 56%. The impact of drought in the United States has weakened month-on-month.

As of May 20, about 8% of cotton-planting areas in the United States were plagued by drought. In addition, the current high-yield pattern in Brazil and Australia has suppressed the rise in international cotton prices. At the same time, under the continuous disturbance of US tariffs, pressure on the consumer side remains. Overall, the recent macro is still the dominant factor, and the impact of fundamentals is relatively limited.

The US Department of Agriculture's monthly report on global cotton supply and demand forecasts shows that the global cotton production is forecast to be 2565.1 in May, a year-on-year decrease of 710,000 tons. However, as the growth of 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. The end-of-period inventory is basically the same as in 2024/25, at 17.066 million tons.

Market forecast: Overall, the domestic market has not had much driving force for the time being, and cotton inventory has been destocked quickly, indicating that rigid demand has strongly supported cotton prices. However, the current product inventory of textile companies has also begun to show signs of accumulation. In addition, June to August is the off-season for domestic cotton textile industry consumption. Under the expectation of rigid demand replenishment, the subsequent market may gradually enter a light period.

It is expected that domestic cotton prices will fluctuate in the current range in the short term.

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