After the May Day holiday, the main Zheng cotton contract briefly tested the key resistance of 17,000 yuan/ton but failed to break through, subsequently falling over 600 points by May 11, with long positions significantly reducing. This correction reflects a shift in market logic from 'tight supply' to 'weak demand.'
Spot Firmness Amid Thin Trading
Domestic cotton commercial inventories continue to deplete, currently at relatively low levels for the year. High-quality Xinjiang cotton (double 29 grade, impurities below 3%) remains scarce, with basis firmly at 1,200 yuan/ton, giving spot sellers strong pricing power. However, spot prices have followed futures downward, and end-user procurement has not followed suit. Textile mills adhere to a 'buy-as-needed' approach, with little appetite for large-scale stockpiling. Pre-season inventories are largely consumed, and off-season expectations suppress restocking confidence, compounded by limited profit margins. The spot market exhibits a 'price without volume' stalemate, lacking upward momentum.
Full Onset of Textile Off-Season Effects
Entering May, the textile industry has moved from the 'golden March-April' peak into the seasonal demand trough, with weak terminal orders becoming the core bearish factor. The market shows structural divergence: 40S high-count and compact high-end cotton yarn orders remain relatively stable, with schedules extending to July-August, while other regular count yarns face order shortfalls. Cotton yarn inventories are gradually accumulating. In terms of pricing, high-end 40S yarn maintains firm offers due to order support, while most regular varieties have seen factory price cuts of 100-200 yuan/ton due to futures declines and weak demand, widening negotiation margins.
The grey fabric market is under more significant pressure, with circular knitting machine operating rates in core areas like Foshan falling to 40%, sharply down from peak season levels. New orders are insufficient, and old orders are winding down, highlighting a 'gap between orders.' Weak consumption in end-use apparel and home textiles increases destocking pressure downstream, creating a negative feedback loop: 'futures decline, spot follows, end-users wait, demand weakens further,' continuously suppressing cotton price rebounds.
Intertwining Multiple Uncertainties
Beyond weak fundamentals, multiple uncertainties are exacerbating Zheng cotton volatility. US President Donald Trump's upcoming visit to China may disrupt overall commodity market sentiment, with the cotton sector likely to fluctuate with macro sentiment in the short term. Meanwhile, persistent market rumors of state reserve cotton release add to bearish pressure. Against the backdrop of weak off-season demand, the prospect of reserve release heightens concerns of supply loosening, combined with elevated valuations after the earlier price surge, prompting risk aversion and further long position liquidation.
Short-Term Pressure vs. Medium-to-Long-Term Support
The current cotton market presents a divergence: weak short-term demand versus a medium-term tight supply. In the short term, the cumulative effect of the textile off-season, weak terminal orders, reserve release expectations, and macro sentiment disturbances will likely keep Zheng cotton in a weak oscillating bottom-finding phase, with a core trading range of 16,000-16,800 yuan/ton and strong upside resistance.
From a medium-to-long-term perspective, supportive logic remains solid. Domestic commercial inventories are low, and the annual planting area in Xinjiang is confirmed to have decreased, with the industry expecting a 3%-5% year-on-year production cut. The annual supply-demand gap persists, and limited import supplements maintain a tight overall balance. As the traditional textile consumption peak season approaches in the second half of the year, terminal demand is expected to gradually recover, offering valuation repair potential for corrected cotton prices.