The cotton market experienced a classic surge-and-retreat pattern after the Labor Day holiday. The main Zhengzhou cotton futures contract briefly touched the key threshold of 17,000 yuan per ton before facing strong resistance. By the close on May 11, the contract had dropped over 600 points from its post-holiday peak. Long positions unwound significantly, trading activity contracted, and market sentiment shifted from pre-holiday optimism to cautious观望. This pullback is not a fundamental reversal but rather the result of seasonal demand weakness clashing with market expectations.
Low Spot Inventories Provide a Floor
Despite the futures decline, the domestic spot cotton market has not seen panic selling. Commercial inventories continue to deplete and remain at relatively low levels for the year, with spot basis staying firm. High-quality Xinjiang cotton—double-29 grade with impurity content below 3%—is particularly scarce, maintaining a stable basis of 1,200 yuan per ton. Spot prices have followed futures downward but with more restraint, reflecting holders' pricing power over premium grades. Spinning mills adhere to a "buy-as-needed" approach, covering only routine requirements, and show little appetite for large-scale stockpiling. Pre-season inventories have largely been consumed, and off-season expectations suppress confidence, resulting in thin spot market activity and a lack of upward momentum.
Off-Season Effects Fully Emerge
May marks the textile industry's definitive exit from the peak "Golden March and Silver April" season into a seasonal demand trough. End-user orders show structural divergence: high-end cotton yarns such as 40S high-density and compact-spun varieties maintain order backlogs extending into July-August, supporting stable mill operations. In contrast, regular-count yarns face weakening order momentum, with spot supply gradually loosening and inventories accumulating slowly. Price divergence mirrors this trend: premium yarns hold firm on steady orders, while most regular-grade yarns have seen factory price cuts of 100-200 yuan per ton, widening negotiation margins.
The grey fabric market faces even greater downward pressure. Weakening end-product demand has transmitted to the weaving sector, dragging down operating rates. In core weaving hubs like Foshan, circular knitting machine utilization has fallen to 40%, sharply down from peak season levels. New order placements are insufficient, existing orders are winding down, and the sector faces a pronounced "gap between old and new orders." Weak consumer demand in apparel and home textiles increases destocking pressure on downstream mills, further reducing upstream cotton procurement. This creates a negative feedback loop: futures decline leads to spot declines leads to观望 leads to weaker demand.
Multiple Uncertainties Amplify Short-Term Volatility
Beyond the weak fundamentals, the market faces multiple uncertainties. U.S. President Donald Trump's upcoming visit to China could disrupt overall commodity market sentiment, with cotton likely to fluctuate with macro情绪 in the short term. Meanwhile, persistent market rumors of state reserve cotton releases act as a key bearish factor suppressing prices. Against the backdrop of weak off-season demand, the prospect of reserve releases exacerbates supply glut concerns. Combined with elevated valuations after the earlier rally, risk aversion has risen, prompting further long-position unwinding and intensifying the short-term correction.
Medium- to Long-Term Tight Balance Remains
In summary, the cotton market currently exhibits a divergence: short-term demand weakness versus medium-term supply tightness. In the near term, the叠加 effects of the textile off-season, weak orders, reserve release expectations, and macro volatility suggest Zhengzhou cotton will likely continue a weak震荡 search for a bottom, with a core trading range of 16,000-16,800 yuan per ton and strong upside resistance.
The medium- to long-term support logic remains intact. Domestic commercial cotton inventories are low, and Xinjiang's annual planting area reduction is confirmed, with industry estimates of a 3%-5% year-on-year production decline. The domestic cotton supply-demand deficit persists, and limited import supplements leave the overall tight balance unchanged. As the traditional peak textile consumption season approaches in the second half of the year, end-demand is expected to gradually recover, providing room for valuation repair after the pullback.