Tongzhou Cotton Market Brief, Week 2 of June 2022
I. Zhengmian (China's cotton futures contract)
(A) Positive Factors
1) On June 10, the central bank released social financing data for May, with an increase of 2.79 trillion yuan, a year-on-year increase of 10.5%. In May, despite the lack of strong policy support, the social financing data exceeded expectations. The substantial growth indicates that the economy is entering a recovery phase.
2) Recently, the Xinjiang Uygur Autonomous Region has frequently held meetings to discuss the cotton industry, and many companies have proposed launching a temporary storage policy to address the current sluggish sales. Although its actual implementation is questionable, policy expectations have boosted the confidence of cotton ginning plants.
3) The sales progress of cotton ginning plants is slow, and banks may postpone loan collection later and will not forcibly urge repayment.
(B) Negative Factors
1) Insufficient downstream orders. Even in the face of falling raw material prices, yarn mills have not seen any improvement in operation, and are even continuing to worsen compared to the previous period. Yarn mills and fabric mills continue to reduce production capacity and accumulate inventory.
2) The USDA's June report lowered China's consumption by 110,000 tons, from 8.38 million tons to 8.27 million tons. Coupled with weak replenishment intentions from yarn mills and traders, who mainly purchase as needed, and insufficient end-consumer demand, consumption in the 21/22 season will inevitably continue to decline. China's inventory-sales ratio has not been adjusted to the appropriate level and needs to be further increased.
3) The Uyghur Forced Labor Prevention Act signed by President Biden stipulates that from June 21, the import of all products from Xinjiang will be prohibited. This act will be implemented next week and will inevitably have a long-term suppressive effect on Xinjiang cotton.
II. American Cotton
(A) Positive Factors
1) New-crop American cotton signing has performed well. As of June 2, a cumulative 774,500 tons of new cotton has been signed, a year-on-year increase of 66.8%. Judging from the current new crop, the tight supply and demand situation next year has not eased significantly.
2) The drought situation in the United States remains severe. Although Texas has received heavy rainfall in the past three weeks, and the drought has been somewhat alleviated, the drought situation remains severe, similar to the historical level in 2013.
3) The hurricane season on the U.S. East Coast is from June to November. This year will be the seventh consecutive year that the hurricane season's activity level has exceeded normal levels. An estimated 14 to 21 tropical storms are expected, with at least 6 developing into hurricanes.
(B) Negative Factors
1) The United States announced on the 10th that the CPI for May exceeded expectations, rising from 8.3% to 8.6%, causing market panic about U.S. inflation. The market is speculating whether the interest rate meeting this week will raise interest rates by 75 basis points. If the pace and intensity of future interest rate hikes increase, it will accelerate the peak of commodities.
2) There has been no continued push from funds. Funds were flat last week, longs did not increase their positions, and the July first notice date has no trading value, so the short squeeze factor in December is still too early. Therefore, from the perspective of capital game, there is a lack of upward driving force.
3) Southeast Asian markets continue to weaken. India's production capacity continues to decline, with inventory accumulating to 5-7 days. Vietnam and Pakistan markets are also weakening compared to the previous period, and there is insufficient driving force for supporting cotton price consumption.
Points to Watch: Policy changes, 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.
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