Tongzhou Market Information Brief, Week 4, December 2021
I. China Cotton
(1) Positive Factors
1) State-owned enterprises and cotton gins currently have a strong willingness to maintain prices and are still unwilling to sell at low prices in the short term.
2) January faces delivery, but the proportion of those truly willing to deliver warehouse receipts in the futures market remains low, supporting the price from falling in January and driving up the May price.
3) After the Spring Festival, downstream textile enterprises face rigid inventory replenishment and a small spring upswing, which may drive cotton prices upward.
(2) Negative Factors
1) Macroeconomic situation: China's 2022 was a year of cross-cyclical adjustment, and the domestic economy lacked upward momentum.
2) On December 23, President Biden signed a bill banning the import of almost all goods from China.
3) Downstream finished goods inventories are still accumulating, reaching the highest level in the same period of history, and downstream consumption and order differences cannot support excessively high cotton prices.
4) Outflow of orders: Foreign textile orders prioritize Southeast Asian countries, while domestic orders are sluggish.
5) Excessively high cotton prices and loss-making spot profits have resulted in yarn and fabric mills being unwilling to hoard raw materials at high prices, and their willingness to hoard goods is not strong.
6) From the perspective of next year's planting expectations, this year's high cotton prices will inevitably lead to an increase in the planting area next year.
II. US Cotton
(1) Positive Factors
1) The on-call ratio for March contracts continued to rise slightly this week, reaching the highest level in the same period of history.
2) After entering 2022, commercial quotas will soon be issued. Domestic textile mills will speed up the use of quotas to offset the high cost of purchasing Xinjiang cotton.
3) State-owned enterprises currently still have some unused import quotas.
4) From the perspective of contract volume, Southeast Asian countries have recently shown impressive contract volumes for US cotton.
5) Southeast Asian countries such as Vietnam and India's yarn mills are still highly profitable, have no inventory, and orders are scheduled until February. The high-level operation of Southeast Asian yarn mills is increasing the demand for US cotton.
(2) Negative Factors
1) Macroeconomic fiscal policies are accelerating the TAPER pace, liquidity is decreasing rapidly, and global consumption is peaking.
2) Due to the Omicron variant causing a surge in COVID-19 cases, it was reported that global airlines canceled more than 4,500 flights during the Christmas weekend.
3) From the perspective of market speculative sentiment, non-commercial fund long positions have further decreased.
4) The current shipping progress of US cotton is still slow and is not meeting expectations.
Summary: From the perspective of China's current macroeconomy, it is still operating weakly, lacking upward momentum. If there are no major changes in the macroeconomy, it will be more negative than positive for cotton. From the perspective of fundamentals, the processing of new cotton is nearing its end, but sales have not shown significant improvement. Downstream yarn and fabric mills are still operating weakly and actively reducing raw material inventories. However, due to orders and profits, finished goods inventories are still accumulating to record highs. However, there was a slight improvement this week, with the operating rate of fabric mills rebounding from low levels and finished goods inventories no longer increasing. The January contract has a significant impact on the market before delivery, especially now that total open interest has fallen to 578,000 contracts, which is a low point this year. The direction of future increases in open interest will determine the price trend.
Focus: Changes in downstream consumption; assessment of the impact of Omicron
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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