Tongzhou Cotton Market Brief, Week 1 of June 2022
I. China Cotton
(1) Positive Factors
1) China has recently introduced a series of policy measures, including 33 stimulus policies in 6 areas to stabilize economic development, and domestic demand will see a significant recovery in the short term.
2) The Russia-Ukraine conflict has escalated again, and the EU's sixth round of sanctions against Russia has come into effect, including a partial oil embargo, making it difficult for global commodity prices to fall significantly.
3) The unblocking of Shanghai has resolved port transportation issues, and is expected to boost domestic demand and exports.
4) To combat current high inflation, the United States plans to cancel some of the tariffs imposed on China.
5) If futures prices fall to 20,000 yuan/ton, bank liquidity will be hampered. At 20,000 yuan/ton, banks will incur losses on lending, and at this point, banks may intervene.
6) As of June 1, Xinjiang cotton sales progress reached 56.6%, accelerating sales progress. Since yarn mills' raw material inventories have not increased on a month-on-month basis, the replenishment is mainly driven by traders, who have stronger pricing power than yarn mills.
(2) Negative Factors
1) Weak end-consumer demand. Cotton prices have fallen significantly recently, and yarn mills' immediate profits have turned from negative to positive. Even so, yarn mills remain weak, and finished goods inventories continue to increase month-on-month, indicating extremely weak end-consumer demand, which is unable to revive yarn mills.
2) High pressure from cotton social inventories and factory finished goods inventories. Yarn mills and fabric mills are mainly focused on destocking.
3) The epidemic has affected people's income, and the domestic economy is sluggish, resulting in a significant reduction in people's income. For consumer goods with high demand elasticity, retail sales have fallen sharply.
II. US Cotton
(1) Positive Factors
1) Oversold US cotton in the 21/22 season has intensified the tight supply and demand situation. In the week of May 26, US cotton sales reached 80,000 tons, a month-on-month increase of 71,100 tons and a year-on-year increase of 37,700 tons, bringing cumulative sales to 3.5667 million tons. The impressive sales data has intensified the overall supply and demand situation.
2) The drought situation in the US remains severe. Although Texas has received heavy rainfall in the past two weeks, alleviating the drought somewhat, the USDA's reported US cotton good-to-excellent rating is currently the lowest on record for this time of year, proving that the drought has indeed affected US cotton growth.
3) Large volume of unpriced July on-call sales, providing support to the market in the coming three weeks. The volume of July on-call sales has been decreasing month-on-month, but the remaining volume is still large. As of the week of May 27, the unpriced volume of July on-call sales was still 910,000 tons.
(2) Negative Factors
1) On June 1, the Federal Reserve began to reduce its balance sheet, reducing it by $47.4 billion per month. This will directly reduce the supply of base money, creating a direct negative impact on monetary tightening.
2) Long positions have not continued to increase in the fund game, and net long positions have decreased month-on-month. In the week of May 31, the net long position held by funds decreased by 2 percentage points to 33%, and the absolute amount of non-commercial long positions decreased by 901 contracts month-on-month.
3) Indian cotton prices have fallen from high levels, with prices falling for three consecutive weeks. The operation of yarn mills in the Indian market continues to weaken, and orders are shrinking. If the Indian market turns around, the basis for cotton price support may no longer exist.
Points to Watch: On-call sales, 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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