Could cotton linter ride the tailwind of surging cotton price?

Recently, Chinese cotton market has been on a continuous upward trend with prices surging sharply, and ZCE cotton futures have broken through the 15,000-yuan mark. In contrast, cottonseed and cotton linter markets have seen significant divergence with widely varying prices, as cottonseed market has maintained firm pricing, while cotton linter market has been stuck in a stalemate with prices facing a dilemma between upward and downward movements.

Since mid-Nov, ZCE cotton futures have risen steadily with increasing gains. Particularly, on Dec 24, the Xinjiang Cotton Association issued a statement indicating that the cotton planting area in Xinjiang will witness structural reduction in 2026. Overnight, the previous market rumors about the decline in cotton planting area for the 2026/27crop year turned into reality. Coupled with the continuous expansion of spinning capacity in Xinjiang, the pull from downstream restocking demand at the end of the year, and the backdrop of skyrocketing metal prices, cotton as a representative agricultural product, has been met with optimistic market expectations. Currently, capital willingness to go long remains strong. ZCE cotton futures have successfully broken through the 15,000-yuan threshold, and spot cotton prices are heading straight for 16,00yuan/mt, with an increase of over 1,500yuan/mt since mid-Nov.

Unlike the upward trend of cotton, cottonseed market has experienced little fluctuation since mid-Nov. Cottonseed oil and delinting mills have mainly replenished stocks based on rigid demand due to poor processing profits. However, as traders are bullish on the future market and have a strong willingness to maintain firm prices, the current price of cottonseed in Xinjiang mostly ranges within 2,350-2,400yuan/mt, while the price of Xinjiang-origin cottonseed in inland areas is around 2,850-2,900yuan/mt, with slight increases in some regions.

Although cotton and cotton by-product industrial chains fall under the category of agricultural products and share similar long-term price fluctuation trends, their short-term movements are not necessarily synchronized due to differences in supply and demand fundamentals, resulting in vastly divergent performance across various segments. Specifically, cotton market has shown strong momentum and cottonseed market has kept prices firm, while downstream sectors have generally performed weakly. Especially under the low-price competition from dissolving wood pulp and paper pulp, the prices of cotton linter pulp and refined cotton have struggled to gain upward momentum. Hampered by this, cotton linter market has been caught in a stalemate. Therefore, against the intertwined impacts of escalating trade frictions, intensifying geopolitical conflicts, and relatively sufficient supply this year, the market prosperity of cotton linter pulp and refined cotton has been under pressure, making the upward path of cotton linter prices bumpy.

In summary, driven by intensifying geopolitical conflicts, growing concerns over supply shortages, and the volatile situation in Venezuela this year, the global scramble for critical minerals will accelerate. Recently, the markets of precious metals and non-ferrous metals such as gold, silver, copper and nickel have witnessed wave after wave of price surges, with some agricultural products also riding the wave to register substantial gains. Due to differences in supply and demand fundamentals, cotton, cottonseed, and cotton linter markets have seen considerable price divergence. Against the backdrop of expectations for a reduction in cotton planting area in the new crop year, cotton prices may trend steadily with an upward bias in the medium to short term, cottonseed market will remain relatively firm, and cotton linter market will face a dilemma between upward and downward price movements.