Tongzhou Cotton Market Brief, Week 4 of July 2022
I. Zhengmian (China's cotton futures contract)
(1) Positive Factors
1) Some banks have clearly extended the repayment period to three years, temporarily alleviating the pressure of zero balance at the end of August for cotton ginning factories.
2) Orders for autumn and winter clothing are starting to arrive, with prices not decreasing significantly. Fabric mills have immediate cash flow, and there are expectations of increased cotton yarn in the grey fabric sector.
3) With September approaching, the spot market lacks effective liquidity, leading to a potential short squeeze.
4) Both northern and southern Xinjiang face drought conditions, affecting the growth of cotton bolls. High temperatures need to be monitored for their impact on cotton quality.
(2) Negative Factors
1) At the end of June, social inventories of cotton were 4.3 million tons, and cotton yarn inventories were around 2 million tons. Currently, there is excessive inventory of cotton yarn. Based on the current monthly consumption of 550,000 tons, there is an oversupply before the new cotton arrives.
2) From the perspective of end-consumer demand, there is no improvement in the downstream market. Despite reduced production capacity by yarn and fabric mills, inventories continue to accumulate to record highs.
3) According to downstream assessments, the Xinjiang cotton ban implemented in June has significantly impacted export businesses.
II. US Cotton
(1) Positive Factors
1) The drought in the US is worsening, with the severe drought rate in Texas rising from 76% to 84%, maintaining a weather premium.
2) At the end of the 2022/23 season in July, US cotton inventories were 520,000 tons, the lowest ever. The inventory-sales ratio adjusted to 14.5%, the lowest in twenty years.
3) The production cost of US cotton provides some reference for pricing. US cotton prices falling below 88 cents have some support.
(2) Negative Factors
1) Last week, the European Central Bank unexpectedly raised interest rates by 50 basis points, the first increase in 11 years. The manufacturing PMI for France and Germany released the following day fell below the boom-bust line. The economic situation in European countries is worrying, increasing market concerns about an impending recession.
2) The Southeast Asian market continues to weaken, with Indian and Vietnamese yarn mills significantly reducing their operating rates last week. Global cotton consumption continues to decline.
3) The risk aversion sentiment among funds is strong, with the net long position of funds falling by 3 percentage points week-on-week in the week of July 19.
Points to Watch: Interest rate decisions
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.
Contact
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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