Cotton Spinning Market Analysis

PART 1: Macroeconomic Factors

(I) International Markets:

1. The WTO, in its latest Global Trade Outlook report, significantly downgraded its growth forecast for global merchandise trade in 2026. The expectation was reduced to 0.5% from the 1.8% forecast in August.

2. Donald Trump announced via Twitter that he would impose 100% reciprocal tariffs on Chinese goods effective November 1st, concurrently initiating controls on the export of key technologies and software.

(II) Domestic Market:

1. The People's Bank of China (PBOC): The increment in aggregate social financing in the first three quarters was 4.42 trillion yuan more than the same period last year. As of the end of September, the M2 balance was 335.38 trillion yuan, a year-on-year increase of 8.4%.

2. The 18th Session of the Standing Committee of the 14th National People's Congress was held in Beijing from October 24th to 28th.

PART 2: Fundamental Analysis

(I) Supply Side

• International Cotton:

1. The harvest progress for the 2024/25 Brazil cotton crop reached 99.8%, up from 99.2% the previous week, compared to 100% last year and a five-year average of 100%.

2. The Brazilian Institute of Geography and Statistics (IBGE) forecasts Brazil's 2025 cotton planted area at 2.125646 million hectares, up 4.8% from last month's estimate but down 0.3% year-on-year. The forecast for seed cotton production is 9.804522 million tons, up 3.7% from last month's estimate and up 10.6% year-on-year.

• Zhengzhou Cotton (CF):

1. According to CottonInfo Network statistics, the harvesting progress across Xinjiang is approximately 53.2%, 9.2 percentage points faster than the same period last year. Breakdown: Southern Xinjiang ~40.1% (+15.1 pp y/y), Northern Xinjiang ~71.3% (+0.3 pp y/y), Eastern Xinjiang ~60.8% (+26.8 pp y/y).

2. Zhengzhou Cotton warehouse receipts stand at 2,773 lots (-50), with 96 lots under effective预报. The total of warehouse receipts and effective预报 is 114,800 tons. As of October 14th, the nationwide notarized inspection volume for the 24/25 season totaled 488,900 tons.

(II) Demand Side

• International Cotton:

• The Indian government's exemption of import tariffs on cotton from August 19th to December 31st is beneficial for US cotton exports.

• Zhengzhou Cotton (CF):

1. As of October 10th, the operating load of spinning enterprises in mainstream regions was 65.4%, down 1.8 percentage points from the previous week.

2. The National Development and Reform Commission (NDRC): The total import tariff quota for cotton in 2026 is 894,000 tons, with 33% designated as state trading quota. The quota does not restrict the trade method and is determined by enterprises independently.

(III) Inventory Situation

1. Imported Cotton Inventory: As of October 9th, port inventory for imported cotton in major ports was 310,700 tons, a weekly increase of 12.09%.

2. Warehouse Receipt Changes: As of October 10th, Zhengzhou Cotton registered warehouse receipts were 2,942 lots, totaling 117,680 tons. The rate of decrease in futures warehouse receipts has slowed.

3. Commercial Inventory: As of October 10th, the national total commercial cotton inventory was 1.1554 million tons, an increase of 174,600 tons from the previous week.

4. Spinning Mill Cotton Inventory: For the week ending October 9th, the cotton inventory days of spinning enterprises in mainstream regions were 27.15 days. Currently, downstream and end-buyers have weak purchasing intent, market sentiment is sluggish, and spinning mills have not yet begun concentrated purchasing or stockpiling cotton.

PART 3: Technical Indicators

• Zheng Cotton (CF): Price-wise, the CF2601 contract retreated from 14,340 to near the 0.618 Fibonacci retracement level (~13,200) of the previous upward wave, coinciding with a previous consolidation zone, suggesting strong support here. Volume-wise, recent long position increases have grown, while short position increases have started to decline. Indicator-wise, the MACD shows the bearish energy histogram area beginning to shrink, and the moving average system shows a significant bias rate, indicating a need for an upward correction.

• US Cotton (CT): The CT2512 contract is in a bottoming consolidation phase, with support at 63 cents/lb and resistance at 67 cents/lb.

PART 4: Analysis Conclusion

Conclusion and Market Outlook:

• The domestic new cotton crop is abundant, with production estimated around 7.2 million tons. Market conditions show seed cotton purchase prices declining, and the gin turnout rate is generally lower than last year, putting pressure on prices. Operating rates show no significant improvement. Domestic commercial cotton inventory and port inventory are beginning to accumulate, with increases in both domestic and imported cotton.

• Overall, pre-National Day purchases in Xinjiang were around 6.1 yuan/kg for seed cotton, with a net gin turnout of 37-38%, implying a ginned cotton cost around 14,300 yuan/ton. Market expectations for hedge pricing have decreased.

• Considering macroeconomic news and the influence of declining US cotton prices, Zheng cotton faces significant upward pressure. However, short-term prices have fallen to a strong support zone, and bearish momentum has weakened somewhat, creating potential for a rebound.

• Zheng Cotton (CF2601): Resistance is seen around 13,500; support is near 13,100-13,200.

• US Cotton (CT2512): Price movement is constrained by the US government shutdown, delaying USDA reports and export/shipment data, leading to a lack of guidance. It is expected to remain in a bottoming consolidation pattern for now, with support at 63 and resistance at 67.