Tongzhou Market Information Brief, Week 2 of December 2021
I. Zhengmian (China's cotton futures contract)
(1) Positive Factors
1) The news of a reserve requirement ratio cut has already been reflected in the stock market, affecting market bullish sentiment.
2) The Central Economic Work Conference held from December 8 to 10 stated that the policy priority for next year will be stability, with proactive fiscal policies.
3) Xinjiang ginneries show a strong willingness to jointly support prices.
4) The May contract is currently heavily discounted compared to spot prices. Has the price already reflected expectations of future consumption shortfalls, and will there be a price rebound in the future?
(2) Negative Factors
1) China's Caixin Manufacturing PMI for November was 49.9, down 0.7 percentage points from October, indicating that the recovery of small and medium-sized enterprises remains slow.
2) Expectations of reduced production in Xinjiang have not been realized. According to the survey results of the National Cotton Market Monitoring System, the total national output is expected to be 5.801 million tons, down 2.5% year-on-year; among which, the output in Xinjiang is expected to be 5.262 million tons, up 0.2% year-on-year.
3) Downstream companies are actively destocking. In order to reduce the accumulation of finished product inventories, spinning mills and weaving mills are reducing production capacity and lowering prices to sell off inventory, but industry chain inventories are still at their highest historical levels.
4) Instability in US-China relations, with the US proposing legislation to ban imports of Xinjiang-related products from China.
II. US Cotton
(1) Positive Factors
1) The Omicron virus is not as severe as expected, and its economic impact may not be as intense as anticipated.
2) Low state reserve inventory levels, along with expectations of easing US-China relations, suggest future purchases of US cotton to replenish reserves.
3) The US economy is still in an inflationary cycle, and cyclical forces persist.
4) The proportion of unpriced contracts is at its highest historical level.
5) Vietnam, the second largest contracting country for US cotton, has had relatively small contract volumes in the early stages. If the contract progress catches up in the future, it will support US cotton prices.
6) US cotton has fallen by 16 cents per pound from a high of 121 cents per pound. After a prolonged decline, there is a demand for a rebound.
(2) Negative Factors
1) The US CPI in November was 6.8% year-on-year, the highest inflation level in 40 years. The Federal Reserve may accelerate the pace of liquidity reduction.
2) Reviewing historical US cotton shipping progress, the average is 64,000 tons. The current cumulative shipment is 600,000 tons. According to the USDA's export data of 3.77 million tons for December, it will be difficult to achieve the shipping target.
3) The operating rates of spinning mills in Southeast Asian countries such as Vietnam and Pakistan have begun to decline, yarn prices have fallen, and profits have shrunk. In the future, the downturn in the textile industry may lead to a decrease in the import volume of US cotton.
4) The net long position of funds continued to decline this week, and the long positions held by non-commercial traders continued to decrease, indicating a weak bullish sentiment in the market.
Summary: The current fundamentals are relatively certain. Inventories across the entire industrial chain are at their highest historical levels for the same period, with both finished product inventories of spinning mills and weaving mills at record highs. Downstream companies are lowering prices to sell off inventory to reduce inventory levels, but the effect is not satisfactory, and the production-sales ratio continues to decline. From the current industrial perspective, there is no improvement in pre-holiday orders, and there is a lack of upward momentum. In the future, we will need to observe when the downstream will show signs of a turning point and the seasonal order situation after the New Year. In terms of domestic macroeconomic policies, both the reserve requirement ratio cut and the economic work conference represent a relatively loose macroeconomic environment, and the impact of macroeconomic benefits on the pace of Zhengmian needs to be evaluated.
Focus Points: Changes in terminal consumption; macroeconomic policies; the 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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