After the May Day holiday, the domestic cotton market experienced a classic surge-and-retreat pattern. The main contract of Zhengzhou cotton futures briefly tested the key threshold of 17,000 yuan/ton but failed to hold. By the close on May 11, it had fallen over 600 points from its peak, with long positions significantly reduced and market sentiment shifting from euphoria to cautious观望. This trend reflects a deep tug-of-war between the seasonal patterns of the textile industry and the supply-demand structure.
Short-term bearish factors concentrated
The core factor suppressing cotton prices is weak downstream demand. After May, the textile industry officially exits the 'golden March and silver April' peak season and enters the seasonal off-season. Market feedback shows a clear structural divergence in terminal orders: only high-end cotton yarn varieties like 40S high-compact and compact-spun have orders extending to July-August, with mills mainly relying on existing orders. In contrast, orders for most regular-count cotton yarn varieties are sluggish, with spot inventories gradually accumulating. Manufacturers have been forced to cut prices by 100-200 yuan/ton, and the room for price negotiation continues to expand.
The grey fabric market is under even greater pressure. Operating rates of circular knitting machines in core weaving regions like Foshan have fallen to around 40%, a sharp decline from the peak season. New orders are insufficient, old orders are winding down, and the industry faces a 'gap between old and new orders'. Weak consumption in terminal apparel and home textiles has increased destocking pressure on weaving mills, further shrinking their demand for upstream cotton. This negative feedback loop of 'futures decline → spot decline → terminal wait-and-see → weaker demand' continues to suppress the room for cotton price recovery.
Beyond weak fundamentals, multiple uncertainties are adding to market volatility. The recent news of US President Trump's visit to China has stirred sentiment in the commodity market, and the cotton sector is likely to fluctuate with macro sentiment in the short term. Meanwhile, persistent market rumors of reserve cotton release, against the backdrop of weak off-season demand, have heightened concerns about supply loosening, further prompting long capital to exit for risk aversion.
Spot market 'priced but not traded'
Despite the weakening futures market, the domestic cotton spot market presents a complex picture of tight inventories, prices following futures downward, and sluggish transactions. Domestic commercial cotton inventories continue to decline, remaining at relatively low levels for the year. Spot basis remains firm, providing medium-term support for cotton prices. High-quality Xinjiang cotton (double 29 grade, impurity below 3%) is particularly scarce, with basis stable at 1,200 yuan/ton, giving sellers strong pricing power.
However, spot prices are falling in tandem with futures, but terminal buying has not followed. Downstream spinning mills generally adhere to a 'buy as needed' principle, only replenishing for daily needs, with little appetite for large-scale stockpiling. Three main reasons explain this: first, earlier peak-season inventories have been largely consumed; second, off-season demand expectations dampen restocking confidence; third, limited profit margins for textile enterprises further curb raw material replenishment. The spot market lacks proactive upward momentum, presenting a classic 'priced but not traded' scenario.
Medium-to-long-term supply deficit logic remains intact
Zooming out, the medium-to-long-term supporting logic for the cotton market has not been shaken by the short-term correction. Domestic commercial cotton inventories are low, and the reduction in Xinjiang cotton planting area is confirmed, with the industry expecting a 3%-5% year-on-year drop in new-season output. This means the annual supply-demand gap for domestic cotton will persist, and with limited supplementary imports, the overall tight balance has not fundamentally changed.
As the traditional textile consumption peak season approaches in the second half of the year, terminal demand is expected to gradually recover. At current levels, corrected cotton prices already offer some valuation repair potential. The core divergence in the market lies in whether short-term bearish factors have been fully priced in and whether the medium-to-long-term supply deficit will regain dominance once the off-season ends.
In summary, in the short term, Zhengzhou cotton futures are likely to continue a weak consolidation and bottom-finding trend, with the core trading range referencing 16,000-16,800 yuan/ton and strong resistance above. However, in the medium-to-long term, the combination of low inventories, production cuts, and demand recovery still provides a floor for cotton prices. For industry participants, the current phase calls for vigilance against short-term volatility while paying attention to the window for positioning ahead of the peak season.