Tongzhou Market Information Brief, Week 3 of January 2022
I. Zhengmian (China's cotton futures contract)
(A) Positive factors
1) Ginning factories are not strongly motivated to sell, and are still in a game of negotiation with downstream buyers.
2) Downstream yarn mills' cotton inventories have fallen below the average, and there is a small peak season after the Spring Festival, with downstream buyers needing to replenish inventories, supporting cotton prices.
3) Recently, yarn prices have slightly increased. Although the increase is not large, after the Spring Festival, with the improvement in demand, if yarn prices rise again, yarn mill profits will improve.
(B) Negative factors
1) In December, the total retail sales of consumer goods increased by 1.7% year-on-year, down from the previous value of 3.9%, with clothing, shoes and hats, and textiles showing a year-on-year decrease of -2.3%.
2) In 2022, the macroeconomy lacked momentum, with an emphasis on "steady growth".
3) Recently, as downstream textile factories have gradually stopped production for the holidays, the speed of cotton yarn inventory reduction has begun to slow down.
4) If yarn mills use only new cotton in production, they will lose money, and the current cotton price of 21400 cannot be effectively transmitted downstream.
5) Excessively high cotton prices offset the export advantages of textiles, and the substitution effect from Southeast Asia is obvious.
II. American Cotton
(A) Positive factors
1) The US economy remains strong, with the CRB index hitting a new high of 245.43 last Friday.
2) Yarn mills in Vietnam, Pakistan, and India are operating well, with strong demand and orders generally extending to February. Strong overseas market demand increases the demand for American cotton.
1) The USDA adjusted its January report, lowering US cotton production and the stock-to-sales ratio by 0.7%.
4) There is still a possibility of a short squeeze due to the high percentage of On-Call sales in March.
(B) Negative factors
1) US CPI in December was 7% year-on-year, the highest since 1982. The highest inflation level in 40 years is forcing the Federal Reserve to raise interest rates as early as March.
2) Excessively high cotton prices in the 21/22 season will lead cotton farmers to increase planting in the 22/23 season.
3) The significantly delayed shipping schedule of American cotton restricts international cotton merchants from purchasing it.
Summary: At the macro level, the three major US stock indexes, commodity indexes, and US Treasury yields have repeatedly hit new highs, verifying that the US economy is still doing well, and is still trading on inflation, especially with crude oil, the king of commodities, rising above the $85 mark. In January, the USDA report lowered US production, and the US stock-to-sales ratio decreased by 0.7%, with strong import demand from countries such as Vietnam and Pakistan. However, with the Federal Reserve expected to raise interest rates as early as March, market liquidity will tighten, which is not conducive to the overall atmosphere of commodities. Domestic ginning factories are not under much pressure to repay loans and are still unwilling to sell at low prices, supporting the market. Coupled with the impetus from American cotton, Zhengmian (China's cotton futures contract) is not easy to fall. However, consumer demand in 2022 was insufficient, and yarn mills cannot bear such high cotton prices, so the center of gravity of cotton prices must shift downwards.
Points to watch: Changes in downstream consumption; Impact of the Tonga volcanic eruption
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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