Tongzhou Market Information Brief, Week 1 of February 2022
I. Zhengzhou Cotton
(I) Positive Factors
1) Supportive policies: Fiscal expansion is being implemented, and special bonds are being actively issued after the Spring Festival.
2) Market conditions: M1, M2, and social financing growth rates are recovering.
3) During the Spring Festival, downstream businesses were closed, and the operating rates of spinning mills and weaving mills fell to historically low levels, with raw material inventories falling below the average. Replenishment of raw material inventories is needed after the holiday.
4) Spring orders are being placed after the holiday, boosting downstream recovery.
5) During the Spring Festival, foreign cotton performed strongly overall, with the prices of American cotton, Indian cotton, and Brazilian cotton all rising.
6) Overseas commodities and crude oil continue to hit new highs, boosting market sentiment.
(II) Negative Factors
1) China's "three carriages" (consumption, investment, and net exports) are still bottoming out. Domestic outbreaks continue to curb consumption, such as the recent outbreak in Baise, Guangxi; real estate is also still bottoming out.
2) Overall inventory in the industrial chain remains high, limiting inventory replenishment.
3) Spinning mills are experiencing losses of around 20,000 yuan in spot profit, which inhibits their inventory replenishment.
4) Cotton ginning factories face high hedging and loan repayment pressures after the festival.
II. American Cotton
(I) Positive Factors
1) Excess personal savings in the US remain high, and consumption is resilient.
2) Low inventory levels at India's CCI and state reserves suggest potential purchases of US cotton.
3) Recent drought in Texas has lowered expectations for increased production next year.
4) Market sentiment is bullish, with the net long position of funds rising from 37.1% to 37.9%, and non-commercial net long positions at the second highest level historically.
5) There are 35,513 outstanding contracts for March, the highest level for the same period in history.
6) Recent shipments and signings of American cotton have been good, especially the signing volume, with 70,000 tons shipped in the week of January 27.
(II) Negative Factors
1) The Bank of England announced a 25 basis point interest rate hike, and the European Central Bank's statement shifted from dovish to hawkish, both increasing market expectations for a Federal Reserve interest rate hike, pushing the 10-year US Treasury yield to its highest level since early 2020, at 1.93%.
2) Excessively high cotton prices in the 2021/22 season could lead to an increase in planting area in the 2022/23 season.
3) Vietnamese spinning mills have already turned to negative spot profits. High cotton prices are gradually reducing profits in the downstream market, ultimately curbing cotton consumption.
Summary: During the Spring Festival, the overseas market performed strongly, with American cotton reaching a high of 129.37 on Tuesday, its highest point in nearly ten years, while Indian, Pakistani, and Brazilian cotton also continued to rise. Market sentiment is bullish, both in terms of the net long position of funds and the number of outstanding contracts. In the domestic market, raw material inventories in the downstream sector had been reduced to below the average level before the Spring Festival, and there will inevitably be a wave of inventory replenishment after the resumption of work, coupled with the placement of post-festival orders. Combining these factors, there will inevitably be a surge after the holiday, but the following factors should also be considered: inventory in the industrial chain is still high, the domestic "three carriages" are performing poorly, the Federal Reserve is about to raise interest rates, and spinning mills are experiencing serious losses. These will limit the upside potential.
Points to Watch: Inventory replenishment in the downstream sector after the festival
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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