Since June, domestic commercial cotton inventories have continued to decline, supported by tight supply conditions and robust downstream restocking demand. Coupled with positive stimulus from macroeconomic policies, cotton prices have experienced a modest upward trend. As of June 30, the settlement price of the main Zhengzhou Cotton contract stood at 13,815 yuan per ton, representing a month-on-month increase of 4.1%. Meanwhile, the spot price for 3128B-grade cotton has risen to 15,160 yuan per ton, marking a monthly gain of 3.97%.

Supply Side: Domestic Tightening Coexists with International Variables

Domestic Supply Tightening: Currently, the domestic cotton supply side is clearly tightening. Data shows that national commercial cotton inventories have continued to decline, dropping to 2.8799 million tons as of June 27, 2025. Meanwhile, import volumes have significantly decreased—between January and May 2025, China's cumulative cotton imports totaled 440,000 tons, a substantial year-on-year reduction of 1.21 million tons, representing a sharp drop of 73.5%. In contrast, China's total cotton imports for the 2024/25 marketing year stood at just 920,000 tons, marking the lowest level in nearly seven years. These figures indicate a decline in domestically available cotton resources, easing some of the supply pressures in the market.

Additionally, based on planting conditions, although the China Cotton Association announced that the country's total cotton planting area has reached 44.823 million mu this year, with crops showing robust growth—particularly in Xinjiang, where the planted area has expanded to 40.9 million mu, representing a 3.3% year-on-year increase—rising temperatures in Xinjiang have accelerated cotton development. Meanwhile, pests have begun to appear in some cotton fields. This situation has introduced certain disruptions to market expectations regarding new-crop cotton yields, prompting some cotton enterprises to adopt a wait-and-see approach and further complicating the rhythm of market supply.

International Supply Dynamics: On the global market front, macroeconomic conditions are gradually recovering, with the U.S. dollar exchange rate declining. Meanwhile, external markets have generally shown an upward trend, providing some support for cotton prices. However, according to the crop progress report released this week by the U.S. Department of Agriculture, as of the week ending June 22, 2025, the percentage of U.S. cotton crops rated as "good" or better stood at just 47%, down from 48% the previous week and significantly lower than the 56% recorded during the same period last year. Currently, U.S. cotton growth is progressing slowly, with a notably low proportion of high-quality crops. Additionally, weather conditions continue to pose significant uncertainties that could further impact cotton production. Moreover, the USDA is set to release its official report on actual cotton planting acreage in the coming days. Market participants are closely watching this data, as it may substantially alter expectations regarding U.S. cotton supply. Such developments could potentially trigger sharp volatility in the international cotton market.

On the demand side: domestic sluggishness amid a complex international landscape

Domestic Demand Sluggish: The domestic cotton yarn market continues to remain weak, with enterprises experiencing a gradual decline in operating rates. As of June 27, the capacity utilization rate among mainstream textile companies dropped to 71.2%, down 0.70% from the previous month. Insufficient end-demand has led to a steadily accelerating pace of cotton yarn inventory accumulation. Meanwhile, recent sharp increases in domestic cotton and polyester staple fiber prices have further intensified the operational challenges faced by yarn manufacturers. Currently, the spot price differential between yarn and cotton prices has fallen to its lowest level since the beginning of this year. Under pressure from inadequate orders and mounting production losses, some small- and medium-sized enterprises have intensified production restrictions or implemented extended summer holidays, severely dampening domestic demand for cotton.

International demand remains complex and diverse: While the global market has shown some macro-level improvements, the uneven pace of the global economic recovery continues to exert a multifaceted impact on cotton demand. On one hand, the growth of the textile industries in several emerging economies provides a degree of support for cotton demand. On the other hand, traditional consumer markets such as Europe and North America are still experiencing a relatively sluggish recovery in demand. Meanwhile, uncertainties surrounding trade protectionism further disrupt the international cotton trade landscape, making it challenging for global cotton demand to achieve significant growth.

Future Prospects

Short-term fluctuations dominate.

In the short term, the tight supply situation for old cotton products in the cotton market will persist, while the supportive influence of fluctuating weather conditions will also continue to play a role for some time. However, the upward momentum of spot prices is now facing significant pressure, with limited follow-up orders in the market and a relatively weak willingness among enterprises to replenish their inventories. Against the backdrop of gradually rising cotton yarn inventory levels, there is relatively limited room for further increases in domestic cotton prices. It is expected that cotton prices in July will exhibit volatile trading patterns, with the main Zhengzhou cotton contract likely to fluctuate within a certain range. Investors should closely monitor changes in market supply and demand as well as broader macroeconomic developments.

Long-term focus on new cotton varieties and market demands

In the long term, the production of new cotton will become the focal point of market attention. If the output of new cotton increases as scheduled, it will exert significant pressure on market supply. At the same time, the improvement in end-demand remains equally critical. Should demand continue to remain weak, the oversupply situation in the cotton market could intensify further, thereby increasing the risk of declining cotton prices. Moreover, macroeconomic policies, international trade conditions, and weather patterns could all have substantial impacts on the cotton market. Relevant enterprises and investors should therefore strengthen their risk management practices, closely monitor market developments, and promptly adjust their operational and investment strategies accordingly.