SunSirs: Cotton Market Consolidated in a Narrow Range in Early August

Price trend

Domestic cotton prices fluctuated within a narrow range in early August. According to SunSirs’ commodity market analysis system, the spot price of 3128B grade lint cotton was 15,179 RMB/ton as of August 11, down 0.59% from the beginning of the month.

Analysis review

Domestically:

The latest domestic commercial inventory data continued to decline rapidly, with no confirmed news on the tariff quota, suggesting a bottom support for cotton prices. As of August 8, China's commercial cotton inventory stood at 2.0067 million tons, a weekly decrease of 150,400 tons. Cotton companies were active in year-end sales. As of August 7, the national sales rate reached 97.7%, a 6.7 percentage point increase year-on-year and an 8.4 percentage point increase over the four-year average. Regarding new cotton, weather in Xinjiang's cotton-producing areas was generally normal. With the easing of high temperatures and effective field management measures, cotton growth had remained stable.

Demand side:

Textile companies reported that downstream textile manufacturers and traders were cautious about replenishing inventory, and market sentiment was pessimistic. Downstream textile companies were experiencing sluggish production and sales, and were less motivated to purchase raw materials. As of August 7th, textile mills in major regions were operating at 65.7%, a 1.35% decrease from the previous month, and the operating rate continued to decline. However, with the September textile peak season approaching and the year drawing to a close, downstream textile companies may see an increase in replenishment.

Data from the General Administration of Customs shows that China's textile exports in July totaled $11.604 billion, a 3.7% decrease from the previous month, while clothing exports totaled $15.162 billion, a 0.7% decrease from the previous month. This reflects the fading of the "export rush" effect. Under the new round of US tariffs, Southeast Asian countries had shown a significant cost advantage in textile and clothing exports, posing a severe challenge to China's textile export competitiveness.

Internationally:

On August 7, the US government imposed a new round of reciprocal tariffs on over 100 countries. These tariffs dampened consumer demand, putting continued pressure on international cotton prices. The average settlement price of the main New York cotton futures contract was 66.72 cents per pound, down 0.70 cents per pound, or 1.0%, from the previous week. The International Cotton Index (M), representing the average landed price of imported cotton at major ports in China, averaged 74.24 cents per pound, equivalent to a RMB import cost of 12,887 per ton, down 229 RM/ton, or 1.7%, from the previous week.

From a supply and demand perspective, the global cotton supply remained stable. The International Cotton Advisory Committee (ICAC) forecasts global cotton trade to remain stable at 9.7 million tons. Global cotton production is projected to reach 25.9 million tons in 2025/26, slightly exceeding the projected consumption of 25.6 million tons. Forecasts indicate that India will maintain its position as the country with the largest cotton planting area, accounting for 38% of global cotton acreage. China is expected to maintain its leading position in cotton production, accounting for 24% of global production.

Future outlook:

Overall, the continued decline in domestic cotton inventories provides strong support for cotton prices. However, expectations of increased cotton production in Xinjiang are strongly suppressing cotton prices. Meanwhile, short-term demand has not improved, and the industry provides little support for cotton prices. On a macro level, the official implementation of the US "reciprocal tariff" will have a direct or indirect negative impact on global textile and apparel trade, raising concerns about the uncertainty risks it brings to the cotton trade market.

If you have any inquiries or purchasing needs, please feel free to contact SunSirs with support@sunsirs.com.