Tongzhou Cotton Market Brief, Week 4 of June 2022
I. Zhengmian (China's cotton futures contract)
(1) Positive Factors
1) Last week's significant 2200-point drop in the September contract exceeded the capacity of cotton ginning factories, potentially leading to resource shortages in the future.
2) On June 21, the US officially banned imports of products from Xinjiang, severely impacting Xinjiang cotton. If there are any government reserve purchase news, prices may rebound.
3) The weather in Texas has not yet shown signs of improvement. If the weather deteriorates again, there is still room for weather speculation.
(2) Negative Factors
1) Ample supply. Social inventory at the end of May was 4.75 million tons, the highest for the same period in history, with sufficient supply of old crops. The 22/23 cotton production is particularly good, and a bumper harvest is basically certain.
2) Weak cotton consumption on the demand side. Yarn and fabric mills lack terminal orders, and production capacity continues to decrease. Regarding domestic demand, the monthly value of clothing, shoes and hats, needles and textiles in May was 95.8 billion yuan, down 16.2% year-on-year. In terms of cumulative value, the cumulative domestic sales in 2022 were 509.3 billion yuan, down 8.1% year-on-year.
3) The Xinjiang ban's implementation has dealt a blow to all aspects of the industry chain.
II. US Cotton
(1) Positive Factors
1) The new season's US cotton contract signing has performed well. As of June 16, the cumulative signing of new cotton reached 920,000 tons, an increase of 77% year-on-year. From the perspective of new crops, the tight supply and demand situation in the next year has not eased significantly.
2) The drought situation in the US remains severe. There has been no rainfall in Texas in the past two weeks, and the drought situation is similar to that of 2013 in the same period. There is still room for weather speculation.
3) US terminal consumption remains resilient, with clothing retail sales in May remaining flat compared to April at $26.3 billion, still at a high level and showing no signs of turning down. The year-on-year growth rate in May was 6%.
(2) Negative Factors
1) The Federal Reserve raised interest rates by 75 basis points to 1.5-1.75%, the first 75-basis-point increase in nearly 30 years. The significant rate hike by the Federal Reserve led to a sharp decline in major commodities such as crude oil and copper.
2) The speculation of July's squeeze is over. The huge unpriced volume in July, which previously supported cotton prices, is now facing the first notification date. The speculative factor has come to a temporary end.
3) The Southeast Asian market continues to weaken, and global yarn mills' production is deteriorating, indirectly proving that global cotton consumption is gradually declining, and there is insufficient consumer momentum to support cotton prices.
Things 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.
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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