Tongzhou Market Information Brief, Week 1 of December 2021
I. China Cotton
Positive factors:
1) Premier Li Keqiang announced on Friday that the reserve requirement ratio would be lowered in a timely manner, resulting in relatively ample market liquidity.
2) On December 1, the China Reserve Cotton announced the termination of reserve cotton release, aiming to support current prices.
3) Xinjiang ginneries show a strong willingness to jointly support prices.
4) Due to the currently large basis, the number of registered warehouse receipts remains the lowest in the past three years, and there are no warehouse receipts in the futures market, resulting in a lack of power for short positions in the January contract.
Negative factors:
1) China's Caixin Manufacturing PMI in November was 49.9, down 0.7 percentage points from October, indicating that the recovery of SMEs remains slow.
2) The expected reduction in Xinjiang's production has not materialized. The National Cotton Market Monitoring System survey shows that the total national output is expected to be 5.801 million tons, down 2.5% year-on-year; of which, Xinjiang's output is expected to be 5.262 million tons, up 0.2% year-on-year.
3) Weak downstream market demand, with spinning mills and weaving mills' operating rates and production-sales ratios declining, and sluggish downstream transactions.
4) Industry chain inventory is at its highest historical level for the same period, and even if there is order demand in the future, the rigid replenishment will not be large.
II. US Cotton
Positive factors:
1) Low national reserve inventory coupled with eased Sino-US relations, requiring future purchases of US cotton to replenish reserves.
2) The US economy is still in an inflationary cycle, and cyclical forces still exist.
3) On-call percentage continues to rise this week, and the percentage of unpriced contracts is at its historical high.
4) Vietnam, the second largest signatory country for US cotton, has signed relatively small amounts in the early period. If the signing progress catches up in the future, it will support US cotton.
5) US cotton has fallen 16 cents/lb from its high of 121 cents/lb. A prolonged decline will be followed by a rise, and there is a future rebound demand.
Negative factors:
1) Powell's "hawkish" remarks have accelerated the tapering process, and the US may accelerate the pace of interest rate hikes.
2) The Omicron black swan event and lockdowns in many European countries. Although Biden has promised not to impose lockdowns, the overall economy will be impacted to some extent.
3) Due to supply chain issues, the shipping progress of US cotton has been slow, and the current shipping progress may lead to the USDA raising the US cotton's ending inventory in December.
4) Non-commercial net long positions have declined this week, and the bullish sentiment in the market has cooled somewhat.
5) Cotton and yarn prices in India and Vietnam are continuously falling, will the market evolve into a situation similar to China's downstream in the future?
Summary: The market was significantly more active last week, mainly affected by the virus and the upcoming position limit. The January contract and May contract showed a clear divergence, with the 1-5 price spread reaching a maximum of 1755, mainly because the January contract is about to be delivered, while the current basis is still around 1500, and no one will deliver goods in the futures market, thus short positions lack power, and the market cannot keep falling. The May contract trades on the fundamentals of future consumption differences. The current situation of downstream spinning mills and weaving mills also supports the view of future consumption differences. In the next week, January contracts need to be quickly reduced in position, and the direction will gradually become clear during the process of position building.
Focus points: Changes in terminal consumption; national policies; Omicron virus
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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