Tongzhou Cotton Market Brief, Week 4 of May 2022
I. Zhengmian (China's cotton)
(1) Positive Factors
1) Currently, the price difference between domestic and international markets is significantly diverging. Xinjiang cotton, being the cheapest cotton globally, has a relatively low probability of a sharp decline. This significant price divergence is favorable for the rise of domestic cotton prices.
2) The actions of ginneries in setting post-harvest prices and taking long positions in the market help support futures prices.
3) Downstream sales are improving. Recently, air-jet spinning sales have shown slight improvement, leading to a reduction in downstream inventories and benefiting future market replenishment.
4) Recently, due to the reduction in the actual delivered price of cotton, the immediate profit losses of spinning mills have narrowed, and some spinning mills have increased their operating rates.
(2) Negative Factors
1) April domestic sales data: The monthly sales value of textiles, apparel, knitting, and hats was 79.1 billion yuan, lower than the April 2020 data during the epidemic, representing the worst monthly sales value for the same period in history.
2) April's social inventory was 5.246 million tons, the highest social inventory for the same period in history. Excessive inventory indicates that downstream markets cannot absorb high cotton prices.
3) As of May 12, the sales progress of Xinjiang cotton was 48%, lagging behind by 48.5 percentage points year-on-year. A large amount of unsold cotton has intensified the sales pressure and sentiment of ginneries. Ginneries are actively seeking sales, but if repayment pressure intensifies later, a collapse in prices may occur.
II. US Cotton
(1) Positive Factors
1) US cotton sales are strong. When prices recently pull back, there is a phenomenon of improved US cotton signing, especially in India. When prices fall, India's purchasing power of US cotton increases, indicating tightness in the Indian market. The strong sales rate of US cotton supports its price.
2) US apparel retail sales are still rising, showing no signs of turning around. US retail sales remain strong.
3) The overall drought in Texas has not shown significant improvement, and weather-related premiums suggest that supply and demand will remain tight next year.
(2) Negative Factors
1) Texas experienced heavy rainfall on Monday and Tuesday, temporarily releasing some of the previously hyped weather premiums.
2) Speculative capital has not continued to exert force, and net long positions of funds have decreased. In the week of May 17, the net long position ratio of funds decreased by 1 percentage point to 39%, and the absolute amount of non-commercial long positions decreased by 3,000 contracts.
3) The high level of unpriced cotton has fallen back. The unpriced volume for July and December has decreased month-on-month. The unpriced volume for July decreased by 5,229 contracts month-on-month, and that for December decreased by 200 contracts month-on-month, further weakening the possibility of a July squeeze.
4) The operation of spinning mills in India and Southeast Asia continues to weaken, orders are shrinking, Indian market orders have turned to zero, and inventories are beginning to accumulate.
Summary: At the macro level, when the peak of monetary policy and the economic peak arrive simultaneously, it is time for commodities to turn downward. Currently, the monetary peak has been reached, as the US has raised interest rates twice and started quantitative tightening on June 1st. However, the economic peak is not yet visible. Focusing on the cotton textile industry, end-consumer demand remains high, and orders still have some support. From a fundamental perspective, the tight situation for US cotton in the new year has not improved, and weather premiums remain. However, recent rainfall in Texas will alleviate some of the drought. In terms of capital, there has been no sustained effort, and the net long positions of funds have decreased month-on-month, and the unpriced volume has also fallen back from a high level. This week, the upward momentum of US cotton is weak. On the domestic side, negative factors are still fermenting, whether it is the slow sales of Xinjiang cotton on the supply side or the lack of fundamental improvement on the demand side, the domestic atmosphere is biased towards bearish operation. Overall, the weakness of the domestic market is more certain than that of the foreign market.
Points to Watch: Rainfall in Texas
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.
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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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