Tongzhou Market Information Brief, Week 3 of December 2021
I. Zhengmian (China's Cotton)
(A) Positive Factors
1) On Monday, the central bank adjusted the LPR (Loan Prime Rate) to 3.8%, down from 3.85%, signaling the start of a rate cut cycle and the impending arrival of looser credit conditions.
2) The combination of rate cuts and reserve requirement ratio cuts, along with the "stability" signal conveyed at the economic meeting, creates a positive macroeconomic outlook.
3) The January contract is facing delivery, but the futures market is severely inverted, necessitating a basis adjustment.
4) Xinjiang state-owned enterprises and the price support alliance strongly intend to maintain prices, unwilling to process cotton resources at low prices.
5) Social inventory is neutral or slightly decreasing.
(B) Negative Factors
1) China's total retail sales of consumer goods in November increased by 3.9% year-on-year, indicating weak domestic consumer demand, with textiles ranking second to last among the nine major consumption sectors.
2) Weak downstream demand has led to yarn mills resorting to price cuts to reduce cotton yarn inventory, but to no avail; raw material inventory continues to accumulate, reaching a historic high.
3) Some yarn mills have begun to suspend operations due to poor sales.
4) Instability in US-China relations, with the US considering legislation to ban imports of Xinjiang-related products from China.
II. US Cotton
(A) Positive Factors
1) The Omicron virus is not as severe as anticipated, and its economic impact may not be as significant as initially feared.
2) Low state reserves, coupled with expectations of eased US-China relations, suggest future purchases of US cotton to replenish reserves.
3) The US economy remains in an inflationary cycle, with cyclical forces still at play.
4) The proportion of unpriced contracts is at a historical high.
5) Consistently low daily trading volumes in India are prompting speculation about reduced Indian production, potentially increasing demand for US cotton.
6) Since the second half of November, cotton market progress in Pakistan has been extremely slow, increasing Pakistan's demand for US cotton.
(B) Negative Factors
1) The US CPI for November rose 6.8% year-on-year, the highest inflation rate in 40 years, potentially leading the Federal Reserve to accelerate the reduction of liquidity.
2) The December FOMC meeting announced an accelerated pace of tapering to counter high inflation.
3) The net long position of funds continues to decline this week, with non-commercial long positions continuing to decrease, indicating a weak bullish sentiment in the market.
4) Reviewing historical US cotton shipment progress, the average is 64,000 tons, while current cumulative shipments stand at 620,000 tons. Based on USDA's export data of 3.77 million tons for December, achieving the shipment target will be challenging.
5) High cotton prices this year have fueled expectations of increased production next year.
Summary: The macroeconomic situation is diverging domestically and internationally, as are reality and expectations. Domestically, rate cuts and reserve requirement ratio cuts aim to release liquidity, creating expectations of loose monetary policy in the future; internationally, liquidity is tightening, with tapering to end in March next year, followed by discussions of interest rate hikes. Domestically, the current futures-spot price spread is severely inverted, but weak downstream consumption prevents a virtuous cycle from forming, making it difficult to pass on high cotton prices. The current situation for yarn and fabric mills is very poor; we need to monitor when a turning point will appear. Internationally, the high proportion of on-call contracts and foreign buying sentiment has not yet ended.
Points to Watch: Changes in end-consumer demand; macroeconomic policies
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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