Tongzhou Cotton Market Brief, Week 4, November 2022
I. Zhengmian (China's Cotton Futures Contract)
(A) Bullish Factors
1) Among major domestic commodities, cotton has experienced the deepest decline. From a valuation perspective, cotton is undervalued, and at a price of 13000, it is considered an over-allocated asset in portfolio allocation, making it more prone to price increases than decreases.
2) Raw material inventories at spinning mills continue to decline, currently reaching historic lows. If the pandemic policy is relaxed, there will be a rigid replenishment demand from spinning mills in the short term.
3) Spot prices remain firm. During the delivery month transition, the basis converges, with spot prices supporting futures prices.
(B) Bearish Factors
1) The relaxation of pandemic policies helps to ease the tension on the supply side. The weekend incident in Urumqi raised questions about the pandemic prevention and control policies, and Urumqi has announced that it will orderly resume railway, civil aviation, and urban public transportation from the 28th.
2) The epidemic situation has become more severe across the country in the past week, leading to a significant decline in the operating rate of spinning mills, weaving mills, and garment factories, with many reporting holidays, resulting in a further deterioration in downstream demand.
3) On the macro level, with the relaxation of the domestic epidemic, but a surge in confirmed cases, the domestic economy has deteriorated sequentially, putting pressure on bulk commodities again.
II. US Cotton
(A) Bullish Factors
1) From the perspective of agricultural product price ratios, the price ratio of cotton to soybeans and cotton to corn are both at historically low levels. On the one hand, cotton has fallen more sharply than other agricultural products, and on the other hand, the current agricultural product price ratios are not conducive to cotton planting next year.
2) The pace of listing in India has slowed down sequentially, and the Indian basis is still about 1000 higher than the US cotton basis, giving US cotton a competitive advantage.
3) US inflation remains high, and the economy still has resilience, providing support for bulk commodities in the short term.
(B) Bearish Factors
1) The US PMI for October continued to fall to near the boom-bust line, and pending home sales in October plunged 32.1% year-on-year, the largest drop since 2013, indicating that the US real estate cycle has peaked and US demand is declining.
2) In terms of the industry, the US has recently seen a phenomenon of reverse repurchase agreements, indicating a significant deterioration in US cotton demand.
3) With the end of the December contract, the previous factors leading to a squeeze are no longer present, and prices have fallen.
Points to Watch: Domestic epidemic prevention policies
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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