Chinese mills are clearly concerned about the dwindling supplies of local high grades. Imported cotton is also now competitive with local cotton, following the rapid rise in local prices during the past ten days. Most SM 1-1/8" quotes, after VAT and import taxes, are now 250 to 400 yuan per ton below the price of local cotton. The overall demand for high grades has also accelerated from a shift in domestic yarn demand to the higher-count yarns. This first led to an increase in demand for Xinjiang top grades and has now spread to import styles. Sliding-scale import quotas are also available in a substantial volume, following the issuance in early June of an additional 1.1 million tons in quotas.

Domestic yarn prices are also rallying in the 32 and 40-count combed yarns, which is adding to spinners' confidence in building nearby stocks.