Tongzhou Cotton Market Brief, Week 3 of October 2022
I. Zhengmian (China's cotton futures contract)
(A) Bullish Factors
1) Recent intensified control measures in mainland China have resulted in Xinjiang cotton being unable to enter mainland warehouses due to the epidemic, even if it is transported there. The shortage of spot supply is further exacerbated, and new cotton cannot form warehouse receipts, posing a problem for January contract delivery.
2) The tense epidemic situation in Xinjiang has not only led to tight cotton supply but also tight cotton yarn supply, with continued downstream support.
3) Currently, cotton inventories at yarn mills are at a historically low level, creating a strong need for mills to replenish their stocks.
(B) Bearish Factors
1) The delayed supply of new cotton means that in the future, with the introduction of policies or easing of the epidemic, the pressure of concentrated cotton supply will intensify, and the market will face enormous hedging pressure.
2) Demand-side weakness is intensifying. The "Golden September and Silver October" period is over, and the downstream sector is once again entering a phase of reduced operating rates and increased inventory. Facing a market with few orders, downstream sectors are not optimistic about the future.
3) After the National Day holiday, multiple outbreaks of the epidemic occurred in various places, and epidemic control measures again became the norm, severely affecting people's consumption and income.
II. US Cotton
(A) Bullish Factors
1) Judging from the export contract signing situation, recent signings have improved and are on par with the same period last year, indicating that US cotton still has overseas demand at this price.
2) Currently, based on the stock-sales ratio in the October report, the equilibrium point for US cotton is around 82 cents. Therefore, in the absence of further fundamental bearish factors, there is strong support around 82 cents.
3) From a technical perspective, US cotton shows a bottom divergence, indicating a rebounding demand.
(B) Bearish Factors
1) The US September CPI exceeded expectations, making a 75-basis-point interest rate hike by the Federal Reserve in November almost certain. A base interest rate as high as 3.25% will severely damage the market and accelerate the bursting of commodity bubbles.
2) Indian cotton is gradually entering the market, and US cotton is also being inspected successively. As the volume of Northern Hemisphere cotton increases and global logistics ease, the supply side will gradually loosen.
3) Global cotton demand continues to face a downward trend. From a full-year perspective, the USDA's October report adjustment is still insufficient. Bangladesh's consumption has not been adjusted downward, Vietnam has only been adjusted downward by 20,000 tons, and India's consumption remains as high as 5.23 million tons. Facing a global economic downturn, US cotton's end-user consumption is entering a destocking cycle; overseas consumption will inevitably decrease.
Points to Note: Opening price
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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