Tongzhou Cotton Market Brief, Week 2 of July 2022
I. Zhengmian (China's cotton futures contract)
(1) Positive factors
1) The market's long-awaited cotton reserve policy was implemented last Friday. This round of reserve started on July 13, 2022. The announcement specified the start time, and the end time will be determined based on market conditions. This demonstrates the government's intention to stabilize prices. If the first batch is ineffective, there may be a second and third batch.
2) The supply side of the market lacks effective liquidity. Currently, the spot price is far below the cost of cotton ginning factories, resulting in huge losses and leading ginning factories to be unwilling to sell, thus creating a lack of effective supply in the market.
3) The reserve policy is equivalent to adding another buyer to the market. The government's attitude of stabilizing cotton prices gives yarn mills a shot in the arm, which is beneficial for downstream yarn mills to increase inventory.
(2) Negative factors
1) The reserve policy was announced last Friday. Judging from the announcement, it did not meet the market's previous expectations. The market previously estimated 500,000 tons or even 700,000 tons, but the actual announcement was 300,000-500,000 tons.
2) There has been a resurgence of COVID-19 outbreaks across the country, with outbreaks in Shanghai, Shenzhen, Xi'an, and other places, affecting public sentiment.
3) The production capacity of downstream yarn and fabric mills continues to decline, and finished product inventories continue to accumulate. Both yarn mill and fabric mill inventories are at their highest levels in history.
II. US Cotton
(1) Positive factors
1) The weather premium for US cotton remains. The Texas region has remained dry for the past two weeks. The percentage of good-to-excellent cotton condition nationwide has decreased by 1 percentage point to 36%, still the worst condition in nearly a decade.
2) New US cotton crop signing is doing well. In the latest week, 88,000 tons of new US cotton crop was signed, with Pakistan, Turkey, and Bangladesh being the main signatories, indicating continued demand for US cotton.
3) There is still no rainfall forecast for Texas in the coming week, and the drought problem remains serious.
(2) Negative factors
1) The Federal Reserve has emphasized its continued efforts to curb inflation, and its hawkish interest rate hikes and balance sheet reduction stance have fueled market concerns about a recession, eliminating the upward momentum of commodities over the past year.
2) The latest fund holdings show that fund longs are continuously withdrawing and hedging, with net longs decreasing by 3 percentage points.
3) Downstream yarn mills in Southeast Asia continue to weaken, with operating rates in Pakistan, Vietnam, and India further declining by 2 percentage points, yarn prices falling, and downstream operations still weak.
Things to watch: US CPI, Texas rainfall
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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