Tongzhou Cotton Market Brief, Week 1 of December 2022
I. Zhengmian (China's cotton futures contract)
(1) Positive Factors
1) Recent relaxation of epidemic prevention measures in various regions has eased downstream logistics, and some yarn mills have indicated that they will gradually increase their operating rates. In addition, with the relaxation of the epidemic, logistics such as express delivery have resumed, and previously suppressed consumption has begun to recover.
2) Yarn mills and textile mills' raw material inventories have continuously declined to historical lows. Under the market's strong macroeconomic expectations, the relaxation of the epidemic will be conducive to yarn mills and textile mills replenishing their inventories.
3) The open interest of the Zhengmian index has hit a record high, and the apparel sector's stock market has risen by as much as 5% in a week, proving that funds are gradually flowing into the apparel sector, and cotton's undervaluation is attracting long-term bullish investment.
(2) Negative Factors
1) In the initial stage of the epidemic opening up, the market must go through a period of pain, residents' income will not increase rapidly in the short term, and consumption will not improve significantly during the period when residents are observing the market.
2) Last week, based on the relaxation of the epidemic, the open interest increased continuously, but the price did not rise much, indicating that there is serious market divergence. Currently, the market expectations are already very high, and the subsequent market performance needs to reflect the weak reality.
3) The downstream continues to weaken, with a lack of orders from the apparel, dyeing, gray cloth, and yarn mill sectors. From a seasonal perspective, the mid-to-late December is a period of reducing operating rates, destocking, and collecting funds.
II. US Cotton
(1) Positive Factors
1) From the perspective of agricultural product price ratios, the price ratios 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 the planting of cotton in the next year.
2) India's cotton listing progress has slowed down month-on-month, and India's basis remains nearly 1000 points higher than that of US cotton, resulting in US cotton still having a competitive advantage.
3) US inflation remains high, and the economy remains resilient, providing short-term support for bulk commodities.
(2) Negative Factors
1) The US PMI in November continued to decline, falling below the boom-bust line, confirming the decline in US demand.
2) The weekly sales volume of US cotton is the worst in nearly ten years, and the demand for US cotton continues to fall. There is no spot demand for US cotton at 80-82 cents, and the price lacks support.
3) The net long position of funds fell by 0.7 percentage points month-on-month to 8.5%, and non-commercial long positions net decreased by 290 contracts.
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.
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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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