Tongzhou Cotton Market Brief, Week 4, August 2022
I. Zhengmian (China's cotton)
(A) Positive factors
1) The August LPR (Loan Prime Rate) was lowered, with the 5-year-plus LPR rate decreasing by 15 basis points to 4.3%, exceeding market expectations. This indicates a clear intention from the government to stabilize the real estate market and signals looser credit conditions.
2) Downstream demand has recently shown significant improvement, with operating rates and production sales rates rising noticeably, and yarn mill finished goods inventories decreasing rapidly.
3) The price difference between the market and physical cotton has widened to a historical extreme. On Friday, the price difference between the market and physical cotton for the 12-1 contract reached -2600, a historical high for the inverted market and price convergence is expected.
(B) Negative factors
1) July's economic data showed an across-the-board decline, with the risk of a second economic downturn. July's total retail sales increased by 2.7% year-on-year, significantly lower than the market's expected 5.3%, indicating a concerning economic reality.
2) Although the downstream has improved significantly compared to the previous period, it still lags behind normal years and orders for end-consumer clothing have decreased by approximately 50% year-on-year.
3) With the 21/22 season ending, and facing nearly 3 million tons of end-of-season inventory and the reality of a bumper harvest in the new season, cotton supply in the 22/23 season will be very ample.
II. US Cotton
(A) Positive factors
1) The market is still trading on the significant reduction in US cotton production due to drought, and concerns remain about the historically low US cotton inventory-sales ratio of 12.6%.
2) In terms of US cotton sales, as of August 11, a total of 1.69 million tons had been contracted, representing 65% of the total, the fastest pace in the last five years. This further exacerbates the tight future outlook for US cotton.
3) The number of unpriced contracts for December remains at a historically high level of 58,000 contracts.
(B) Negative factors
1) Southeast Asian countries have seen a decline in terminal exports. In July, Bangladesh's clothing exports fell by 17.7% month-on-month, and while Vietnam's clothing exports increased by 2.7% month-on-month, inventory accumulation has become apparent.
2) The global consumption report estimates global consumption at 25.93 million tons in August, a decrease of only 30,000 tons compared to the 21/22 season, with China's consumption remaining at 8.16 million tons. Combined with tightening global liquidity, end-consumer clothing consumption in Europe and the US has turned downward, with the possibility of high global consumption in the market.
3) In terms of global supply, in addition to the significant reduction in US cotton production, Xinjiang, Brazil and India have good growing conditions, maintaining expectations of increased production, and overall global supply is still increasing.
Points to watch: Opening price; downstream orders
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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