Upon returning from the May Day holiday, Zhengzhou cotton futures did not sustain their pre-holiday upward momentum, instead experiencing a surge followed by a correction. After briefly testing the key resistance level of 17,000 yuan per ton, the main contract retreated, accumulating a drop of over 600 points from its post-holiday peak as of May 11. The rapid withdrawal of capital from the market and the sudden cooling of sentiment indicate that the market's trading logic has shifted from pre-holiday expectations to the reality of fundamental supply and demand.
Low Inventories vs. Weak Demand: A Polarized Spot Market
The current spot market for domestic cotton exhibits a classic 'fire and ice' pattern. On one hand, commercial inventories continue to draw down and are at a relatively low level for the year. High-quality Xinjiang cotton resources, particularly those with low impurity content, are scarce, with basis levels remaining stable at 1,200 yuan per ton, providing a solid floor for spot prices. On the other hand, while spot prices have followed the futures market lower, end-user purchasing demand has not kept pace, resulting in sluggish overall transaction volumes. Downstream spinning mills generally adhere to a 'buy-as-needed' principle, maintaining only routine replenishment and showing little willingness to build large inventories. This phenomenon stems from the depletion of peak-season stockpiles, tempered confidence due to off-season demand expectations, and limited profit margins for textile enterprises, all of which suppress the incentive for raw material restocking.
Deepening Off-Season Effects: The Transmission Chain from Yarn to Grey Fabric
As May begins, the textile industry has officially exited the traditional peak season of 'Golden March and Silver April' and entered the seasonal demand lull. The lack of end-user orders has become the core bearish factor weighing on cotton prices. The current textile market shows a structural divergence in orders: only high-end cotton yarn varieties, such as 40S combed compact yarn, maintain relatively robust demand, with order backlogs extending to July and August, and mills primarily executing existing contracts. In contrast, orders for most regular-count cotton yarn varieties are faltering, with clear signs of weakening demand. Cotton yarn spot inventories are gradually accumulating. In terms of pricing, high-end 40S yarns, supported by stable orders, maintain strong pricing power with prices remaining steady. However, most regular-count yarns, pressured by falling futures prices and weak demand, have seen manufacturers cut prices by 100-200 yuan per ton, and room for negotiation is expanding.
The grey fabric market is experiencing an even more pronounced downturn. Weak demand for finished products has transmitted to the weaving sector, leading to a continuous decline in operating rates. In core weaving areas like Foshan, utilization rates for circular knitting machines have fallen to a low of 40%, a significant drop from peak season levels. The market is plagued by insufficient new orders and the winding down of old orders, creating a gap in order flow. Weak consumption in the end-use apparel and home textile markets is increasing destocking pressure on downstream textile enterprises, further reducing their demand for upstream cotton raw materials. This has created a negative feedback loop: 'falling futures lead to falling spot prices, which leads to end-user wait-and-see, which further weakens demand,' continuously suppressing the potential for a price rebound.
The Bull and Bear Battle: Divergent Logic Between Short-Term Pressure and Long-Term Support
In summary, the current cotton market exhibits a clear divergence between short-term demand weakness and medium-term supply tightness. In the short term, a confluence of bearish factors—including the deepening off-season effect, lack of terminal orders, expectations of state reserve releases, and macroeconomic sentiment fluctuations—will likely cause Zhengzhou cotton futures to continue a weak, volatile search for a bottom. The short-term core trading range is expected to be between 16,000 and 16,800 yuan per ton, with strong resistance on the upside. Widespread expectations of a state reserve release, combined with weak off-season demand, have exacerbated market concerns about supply loosening. This, coupled with the relatively high valuation of cotton prices after the earlier surge, has heightened risk aversion among capital, prompting long position holders to exit and intensifying the short-term correction.
From a medium to long-term perspective, the market's support logic remains solid. Domestic commercial cotton inventories are at low levels, and a reduction in Xinjiang's annual planting area is confirmed. The industry estimates a 3-5% year-on-year decline in new-season cotton production. This, combined with limited supplementary imports, means the domestic cotton supply-demand balance is expected to remain tight. As the traditional peak textile consumption season approaches in the second half of the year, terminal demand is likely to gradually recover, providing room for valuation repair for the corrected cotton prices.