After the May Day holiday, China's domestic cotton market experienced a brief rally followed by a sustained pullback. The main Zhengzhou cotton futures contract failed to decisively break through the key resistance at 17,000 yuan/ton and, as of May 11, had retreated over 600 points from its peak, with long positions significantly reduced and market sentiment turning cautious. This movement reflects a classic tug-of-war between the seasonal textile off-season and low spot inventories.
The Stalemate of Low Spot Inventories and End-User Wait-and-See
On the supply side, current commercial cotton inventories in China are at a relatively low level for the year, with a clear destocking trend. High-quality Xinjiang cotton (double 29 grade, impurity below 3%) is particularly scarce, with its basis firmly maintained at 1,200 yuan/ton, giving premium spot cargoes strong pricing power. This means spot price support remains intact at the bottom—tight stocks are a fact, but the problem lies in the lack of follow-through from the demand side.
Downstream spinning mills generally adhere to a 'buy-as-needed' principle, maintaining only routine replenishment for essential needs, with little to no willingness for large-scale stockpiling. Pre-season inventory has been largely consumed, while off-season demand expectations and limited profit margins further suppress raw material restocking enthusiasm. The spot market is in a stalemate characterized by 'prices following futures down, but trading thin', lacking momentum for an active rally. This phenomenon highlights a confidence gap along the industrial chain: upstream mills are reluctant to sell due to low stocks, while downstream buyers are hesitant due to insufficient orders.
Off-Season Effects Spread, Gray Fabric Sector Under Greater Pressure
Entering May, the textile industry has officially left the 'golden March and silver April' peak season, and seasonal demand weakness has become the core bearish factor weighing on cotton prices. In terms of order structure, only high-end cotton yarn varieties such as 40S high-compact and compact-combed are performing relatively steadily, with order backlogs extending to July-August, and mills mainly executing existing orders. However, other regular-count cotton yarn varieties are experiencing sluggish order intake, with yarn inventories slowly accumulating. Mills have generally reduced offers by 100-200 yuan/ton, and the market's bargaining space is widening.
The downward trend in the gray fabric market is even more pronounced. Weak final product demand has transmitted to the weaving end, with mill operating rates in core weaving areas like Foshan falling to 40%, a sharp drop from the peak season. New order placements are insufficient, and old orders are winding down, creating a 'gap between old and new orders' in the industry. This negative feedback loop—'futures fall → spot follows → end-users wait → demand weakens further'—is continuously suppressing the rebound potential of cotton prices.
Multiple Uncertainties Compound, Market Sentiment Under Pressure
Beyond the weak fundamentals, the market is also facing multiple uncertainties. The upcoming visit of US President Donald Trump to China could disrupt overall commodity market sentiment, and the cotton sector is likely to fluctuate in the short term with macro sentiment. Meanwhile, persistent market rumors about state reserve cotton release are adding to concerns about supply loosening, especially against the backdrop of weak off-season demand. Combined with elevated valuations after the earlier price surge, risk aversion is rising, prompting longs to reduce positions and exacerbating the short-term correction.
In terms of price range, the core trading range for the main Zhengzhou cotton contract is expected to be 16,000-16,800 yuan/ton in the short term, with strong resistance above. The market is in a phase of 'concentrated bearish factor release', and a weak, oscillating bottoming process is the most likely near-term path.
Medium-to-Long Term Support Logic Remains Intact
Despite near-term pressure, the support logic for the cotton market in the medium-to-long term remains solid. Commercial cotton inventories are low, and the annual reduction in Xinjiang cotton planting area is a done deal, with the industry expecting a 3%-5% year-on-year decline in new season output. This means China's annual cotton supply-demand gap will persist, with limited supplementary imports, and the overall tight balance has not fundamentally changed.
As the traditional textile consumption peak season approaches in the second half of the year, end-demand is expected to gradually recover. The current price correction actually provides room for valuation recovery—once the off-season effect fades and bearish factors are digested, low inventories and production cut expectations will re-emerge as the core drivers for price upside.