Tongzhou Market Information Brief, Week 2 of February 2022
I. Zhengmian (China's cotton futures contract)
(1) Positive Factors
1) January's social financing and new RMB loans exceeded expectations, benefiting commodities in the financial environment.
2) Yarn mills' raw material inventories are below the five-year average, indicating potential replenishment demand.
3) Ginneries are not yet under significant pressure to repay loans, and high costs prevent them from selling at a loss.
4) Planting costs remain high next year.
5) Overseas commodities and crude oil continue to hit new highs, boosting market sentiment.
(2) Negative Factors
1) The domestic economy lacks momentum, with residents' income levels declining compared to before, weakening consumer power.
2) Overall inventory in the industrial chain remains high, limiting replenishment.
3) Downstream orders are returning to Southeast Asia, coupled with yarn prices unable to bear high cotton prices, limiting yarn mill replenishment, potentially significantly reducing expectations of a small spring rally.
4) Significant hedging pressure above the market, with ginneries expected to hedge heavily.
II. US Cotton
(1) Positive Factors
1) US household excess savings remain high, indicating consumption resilience.
2) US CPI continues to hit new highs, with the US still experiencing inflation.
3) Strong domestic cotton demand in Bangladesh allows for high-priced cotton, boosting global cotton prices due to increased demand for Indian cotton.
4) 30,541 lots of March unpriced contracts remain, a record high for the same period.
(2) Negative Factors
1) US January CPI increased by 7.4% year-on-year, hitting a new high and accelerating the pace of Fed rate hikes.
2) The net long position of funds has decreased this week, with non-commercial net long positions falling by 1790 lots.
3) Vietnamese yarn mills' spot profits have turned negative, with high cotton prices gradually reducing profits in the downstream market and ultimately suppressing cotton consumption.
Summary: Last week was the first week after the Spring Festival holiday. Cotton prices opened higher but closed lower due to the rise in overseas markets during the Spring Festival holiday, and domestic and international yarn prices also increased by 500-1500. Due to incomplete resumption of work by domestic yarn mills, although downstream yarn and fabric prices have risen, actual transactions are not many, and there is no significant increase in downstream replenishment. Most yarn mills will resume work after the Lantern Festival, so the key focus this week is on downstream replenishment and order situation after the resumption of work. Overseas markets such as US cotton, Indian cotton, Pakistani cotton, and Brazilian cotton are still rising, especially Indian cotton, which has been pushing up prices due to strong demand from Bangladesh. In the future, as the Fed's rate hikes draw closer and the profits of Southeast Asian textile industries are gradually eroded by high cotton prices, overseas cotton prices will gradually shift downwards.
Points to Watch: Downstream replenishment and order situation after the holiday
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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