Tongzhou Market Information Brief, Week 5 of August 2021
I. US Cotton
Positive factors:
1) Powell's speech at the Jackson Hole meeting on Friday was clearly dovish, stating that it is premature to raise interest rates.
2) The growth progress of US cotton is significantly slower, affecting the boll weight and thus the yield.
3) Hurricane Ida made landfall in Louisiana with wind speeds reaching 155 mph.
4) Pfizer's vaccine has received full approval, and the vaccination rate is expected to continue to accelerate.
Negative factors:
1) The Federal Reserve has determined the Taper timeline and will confirm balance sheet reduction by the end of this year.
2) The US good rate is currently at an absolute historical high, and the growth condition is good.
3) The first phase of the US-China trade agreement is about to expire, and the export situation of US cotton depends on the US-China relationship.
II. Zhengzhou Cotton
Positive factors:
1) The macroeconomic debt leverage ratio has not yet shown negative growth, which means that the debt of enterprises, residents, and the government is still increasing, although the growth rate is declining. This also indicates that the demand side of commodities has not yet shown contraction.
2) Domestic new cotton is on the market, and the processing capacity of cottonseed is increasing. Coupled with the expectation of reduced production, the ginning situation is easing from a shortage, reflecting strong production and consumption.
3) The purchase price is highly correlated with the futures price. During the purchase period, the futures price is mostly at a discount or at par. However, if the futures price is significantly discounted, some people will switch from spot to futures, and the futures price will rebound.
Negative factors:
1) Macroeconomic drivers are weakening, with tightening expectations, PMI peaking and falling, and economic downturn confirmed.
2) Cotton is in a historically high valuation range.
3) Demand for textiles and apparel has peaked, yarn prices have peaked and fallen, and yarn mill profits have peaked and fallen.
4) With cotton prices rising and shipping costs rising, demand peaking and falling, foreign trade enterprises are facing difficulties on both sides, leading to selective order acceptance and order cancellation, resulting in further deterioration of orders.
Core Logic: On the macro level, both leading and real economic indicators show that the Chinese economy has entered the later stages of stagflation, lacking endogenous momentum in the later stages; on the supply side, Xinjiang cotton harvesting is a high-probability event, leading to increased production costs due to rush harvesting and increased ginning capacity; on the demand side, downstream textile mills are reducing operating rates, yarn prices are falling, and finished product inventories are accumulating, indicating that the peak season is not as strong as expected.
Variables to watch: US hurricanes; Xinjiang weather; US-China trade relations
Leaders from Xiamen C&D Group visited Tongzhou for investigation and guidance
On March 3, Wang Yongqing, Vice President of Xiamen CNOOC Group, visited Tongzhou Group for investigation and guidance. Wei Gangmin, Chairman of our company; Huang Hongyu, President; Li Tao, Vice President; and Zhang Zhiyan, Director of the General Office, met with and participated in a symposium.
Tongzhou Cotton Market Brief, Week 1 of March 2025
1) This week's National People's Congress and the Chinese People's Political Consultative Conference (NPC & CPPCC) in China boosted market expectations for steady growth. In February, the Purchasing Managers' Index (PMI) for manufacturing stood at 50.2%, up 1.1 percentage points from the previous month, indicating a significant improvement in the manufacturing sector.
In 2024, China's dyeing industry saw rapid export growth to ASEAN and RCEP member countries, exceeding the overall export growth rate. However, this growth was accompanied by a decline in prices. From January to December, China's exports of eight major dyeing products to ASEAN totaled 7.908 billion meters, a year-on-year increase of 12.14%, 4.61 percentage points higher than the overall export growth rate, accounting for 23.58% of total exports. The average export price was US\$1.19 per meter, a year-on-year decrease of 2.75%, 0.64 percentage points lower than the overall decline. Exports to RCEP member countries totaled 8.431 billion meters, a year-on-year increase of 11.35%, 3.82 percentage points higher than the overall export growth rate. The average export price was US\$1.17 per meter, a year-on-year decrease of 2.79%, 0.60 percentage points lower than the overall decline.
On February 28, Mr. Huang Hongyu, President of our company, was invited to attend the 2025 Zhangjiagang Cotton Industry Development Conference and, as a guest speaker at the "Xiangshan Roundtable," shared his views on the cotton market and trading opportunities.
Henan Tongzhou Cotton Industry Co., Ltd.
Contact
Henan Tongzhou Cotton Industry Co., Ltd.
Address: 10th Floor, Henan Nongxin Building, No. 19 Commercial Outer Ring Road, Zhengdong New District,Zhengzhou, China
Tel：86037165836206
Email：tongzhou@tongzhoucotton.com
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