Cotton Market Insights
Market Data and Key Updates
In futures trading yesterday, the cotton 2701 contract settled at 16,830 yuan per tonne, up 100 yuan or 0.60% from the prior session. In the physical market, the 3128B grade cotton price at Xinjiang mills stood at 17,850 yuan per tonne, rising 65 yuan day-on-day, with a spot basis of CF01+1,020, narrowing by 35. The national average price for 3128B cotton reached 17,969 yuan per tonne, up 60 yuan, with a spot basis of CF01+1,139, declining by 40.
According to customs data, China's cotton imports in July 2026 totaled 90,000 tonnes, a decrease of 20,000 tonnes or 16.5% month-on-month, while surging 71.1% year-on-year compared to 50,000 tonnes in the same period last year. Industry reports indicate that India's CCI cumulatively sold 1.568 million tonnes from reserves in the 2025/26 season through the week ending August 14, with weekly sales exceeding 30,000 tonnes. Spinning mills and traders accounted for nearly equal shares of purchases. Following higher domestic cotton spot prices in India, CCI raised its auction prices last week, yet purchasing enthusiasm from traders and downstream enterprises has not shown a notable decline.
Market Analysis
On the international front, the latest USDA report lowered the U.S. cotton abandonment rate, though U.S. production was slightly trimmed due to reduced yields, broadly aligning with market expectations. The anticipated global supply reduction for the 2026/27 season persists, with the global cotton supply-demand balance expected to shift from surplus to deficit, providing medium-to-long-term support for higher international cotton price levels. Additionally, China may potentially rotate in imported cotton after its current reserve sales conclude, which could lend further support to U.S. cotton.
Domestically, the supply issue for this year has been resolved following the implementation of the reserve sales policy. However, the policy's market impact will depend on the total volume released and the extent of Xinjiang's production reduction for the 2026/27 season. Currently, cotton growth across Xinjiang has entered the late boll-forming stage. Due to high temperatures and water resource constraints, growth conditions vary significantly across regions, leaving new-crop output subject to considerable uncertainty.
Strategy: Neutral-to-bullish. With expected improvement in downstream orders in late August and further tightening of supply-demand dynamics for the new season, the far-month 01 contract may retain some upward momentum over the medium term.
Risks: Macroeconomic and policy risks, weather conditions in major producing countries.
Sugar Market Insights
Market Data and Key Updates
In futures trading yesterday, the sugar 2701 contract closed at 5,319 yuan per tonne, up 7 yuan or 0.13% from the prior session. In the spot market, white sugar prices in Nanning, Guangxi stood at 5,190 yuan per tonne, up 10 yuan, with a spot basis of SR01-129, widening by 3. In Kunming, Yunnan, white sugar prices were 5,040 yuan per tonne, unchanged, with a spot basis of SR01-279, narrowing by 7.
According to data from the General Administration of Customs, China imported 470,000 tonnes of sugar in July 2026, down 274,400 tonnes year-on-year. Cumulative imports from January to July 2026 reached 1.607 million tonnes, a year-on-year decrease of 175,100 tonnes. For the 2025/26 crushing season through the end of July, cumulative sugar imports totaled approximately 3.3696 million tonnes, up about 125,700 tonnes year-on-year.
Market Analysis
For raw sugar, adverse weather has reinforced market expectations of a global supply deficit for the 2026/27 season. The most challenging period for raw sugar prices appears to have passed, with strong expectations providing downside support and likely lifting the medium-to-long-term price center. However, Brazil remains in its peak crushing period through August and September, and with reduced rainfall, crushing progress may accelerate, potentially exerting some pressure on prices. Attention should be paid to Brazil's production data and sugar mix ratios.
For Zhengzhou sugar, domestic production growth this season has far exceeded expectations, with inventories rising to historical highs and a clear surplus pattern for the current season. Looking at the medium-to-long term, domestic production is likely to continue expanding next season, further narrowing the supply-demand gap and weakening the correlation between domestic and international markets.
Strategy: Neutral. In the short term, Zhengzhou sugar may rebound on the back of raw sugar gains, but upside potential is likely constrained by inventory pressures, with the pattern of stronger external and weaker domestic prices expected to persist.
Risks: Macroeconomic, weather, and policy impacts.
Pulp Market Insights
Market Data and Key Updates
In futures trading yesterday, the pulp 2611 contract closed at 4,730 yuan per tonne, up 6 yuan or 0.13% from the prior session. In the spot market, the price of Chile's Silver Star softwood pulp in Shandong was 4,810 yuan per tonne, unchanged, with a spot basis of SP11+80, narrowing by 6. Russian softwood pulp prices in Shandong stood at 4,635 yuan per tonne, unchanged, with a spot basis of SP11-95, narrowing by 6.
Imported wood pulp spot prices remained largely stable yesterday. The main contract on the Shanghai Futures Exchange fluctuated within a narrow range, first declining then recovering. Some spot traders were reluctant to sell at lower prices, keeping imported softwood pulp prices broadly steady, with selective price increases in the Jiangsu, Zhejiang, Shanghai, and Guangdong regions for certain tight grades. Imported hardwood pulp remained in tight supply, with traders maintaining relatively firm selling attitudes supported by costs, though downstream paper mills showed limited acceptance of higher prices. Imported unbleached kraft pulp and chemi-mechanical pulp saw subdued trading activity, with prices remaining stable as market participants adopted a wait-and-see stance.
Market Analysis
On the supply side, Canfor announced on July 14 the permanent closure of its Northwood pulp mill in Prince George, British Columbia, reducing annual northern bleached softwood kraft pulp output by approximately 300,000 tonnes. While this development provided some positive sentiment for prices, the reduction is insufficient to reverse the global pulp market surplus. Domestic imports remained flat year-on-year in the first half of the year, but domestic pulp output has increasingly substituted for imports, with incremental demand largely absorbed by domestic production. The overall domestic supply environment remains ample. Several domestic pulp projects are scheduled to commence operations in the second half of the year, suggesting that robust growth in domestic pulp production is likely to continue.
On the demand side, domestic finished paper production maintained rapid growth in the first half of the year, but end-user demand has remained insufficient, leaving the paper market in oversupply. Excess capacity in the paper segment has resulted in persistent industry losses. Downstream paper mills have adopted cautious raw material procurement attitudes, with generally low purchasing willingness.
On inventories, the latest weekly data showed a slight decline in port stocks, though overall levels remain elevated.
Strategy: Neutral. With no fundamental improvement in the pulp market, prices are expected to remain under pressure from high port inventories, weak demand, and warehouse receipt overhangs in the near term.
Risks: Macroeconomic risks, unexpected changes in overseas quotations, and currency risks.
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