Tongzhou Market Information Brief, Week 2 of January 2022
I. China Cotton
(1) Positive Factors
1) The logic of cost support remains strong, and ginneries have a strong willingness to maintain prices.
2) Ginneries currently have little repayment pressure and are not under significant financial pressure.
3) The industrial sector has seen downstream replenishment of demand, and a small spring upswing is expected after the New Year.
(2) Negative Factors
1) On the macroeconomic front, domestic consumption is not strong, and the overall economic downturn is driving down the center of gravity for Zhengzhou cotton.
2) Downstream users cannot accept the high cotton price; the point-to-point profit of spinning mills is at a loss, and the high cotton price cannot be passed on.
3) Spinning mills and weaving mills have started to take holidays this week, the operating rate is declining, and pre-holiday inventory replenishment has basically ended.
4) The Xinjiang ban has forced some companies to change their cotton structure.
5) The substitution effect of Southeast Asian countries such as Vietnam and India is significant.
II. US Cotton
(1) Positive Factors
1) The current US economy is doing well, and domestic demand remains strong.
2) Spinning mills in Vietnam, Pakistan, and India are operating well, demand is strong, and orders generally extend to February. Strong demand in foreign markets increases demand for US cotton.
3) Market speculation is intense. The latest net long ratio of funds has risen to 40.05%, and the proportion of unpriced on-call in March remains at its historical high.
(2) Negative Factors
1) The US unemployment rate for December, released on January 7, fell beyond expectations to 3.9%, and the strong US labor employment strengthened market expectations of faster tightening by the Federal Reserve.
2) The sales and shipment volumes of US cotton in the week ending December 30 both fell. Only 720,000 tons have been shipped so far. Based on the current progress, the USDA report for January is likely to reduce US cotton exports.
3) Recently, the number of new daily COVID-19 cases reported in the United States has approached one million, with Omicron cases accounting for more than 95%.
Summary: Currently, the logic of transactions for both long and short positions in domestic cotton is very clear. Long positions are mainly trading on cost support, while short positions are based on the poor domestic demand; downstream consumption cannot support the current high cotton price and believes that cotton prices will definitely fall in the future. The reason why the futures market cannot fall now is mainly due to cost support. US cotton is affected by high cotton prices in India on the one hand, and strong demand in Southeast Asia continues to support US cotton on the other. From the current point of view, the time point for a major drop in the market is not yet visible, but there is no strong driver for an increase. It is suggested to focus on intraday short-term trading.
Focus on: 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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