2016 Chairman Interview: The turning point of cotton prices comes from the implementation of the reserve release policy

2016 Chairman Interview: The turning point of cotton prices comes from the implementation of the reserve release policy
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  • 2016 Chairman Interview: The turning point of cotton prices comes from the implementation of the reserve release policy

    Introduction: After two years of hovering around 13000 points, cotton prices finally fell below 10000 points. A slight rebound has been seen recently, however, a cotton industry leader recently stated that the downward trend in cotton prices is not yet over. What are your thoughts?

“Investors who follow cotton price fluctuations have likely noticed the current situation: cotton prices have fallen from 13000 yuan/ton at the beginning of the year to below 10000 yuan/ton currently. The overall trend remains a rapid decline, and the downward trend is not yet complete,” said Wei Gangmin, chairman of Henan Tongzhou Cotton Industry Co., Ltd.
After the Lantern Festival, cotton futures experienced a "late spring cold snap." ICE cotton prices fell continuously, hitting a six-and-a-half-year low. Coupled with increasing news about the rotation of state cotton reserves in April, market pessimism surged, and Zhengzhou cotton futures began to fall sharply on February 24, falling below the 10,000 yuan mark on the 25th for the Zhengzhou Cotton 1701 contract.
On the one hand, although the resumption of work by textile enterprises after the Spring Festival was better than expected, due to relatively sufficient inventories and the rapid decline in cotton prices, sales of finished products by textile enterprises are difficult, and some enterprises continue to lower prices by 100-150 yuan/ton.
On the other hand, the impending news of cotton reserve releases is another reason for the sharp drop in cotton prices. Since November 2015, rumors of cotton reserve releases have been circulating, and the current predictions for the release are largely consistent, with the timing likely to be in April. This will avoid affecting the processing and sales of new cotton while also preventing pressure on the clearing of raw cotton at the end of the year.
Regarding the upcoming cotton reserve release policy, Wei Gangmin believes that the new round of reserve releases will be combined with international cycles. In other words, while cotton reserve releases were previously priced, they may now be cyclical. Cyclical reserve releases involve a weighted average of the international A index and the domestic spot index. Whether international or domestic prices fall, this price index will fall.
So, what impact will the implementation of a cyclical reserve release policy have on China's cotton industry? Wei Gangmin also elaborated on this: “This change will certainly address the price difference between domestic and international raw materials. For example, when the price difference between domestic and international raw materials reaches 5000 yuan/ton, no matter how high the manufacturing level is, this price difference cannot be absorbed. If the raw materials used in China are 5000 yuan/ton higher than those abroad, how can enterprises survive?”
How can China's cotton reserve releases break the gap between domestic and international prices? Wei Gangmin believes that once the reserve releases cause cotton prices to fall to a point where foreign farmers are unwilling to plant, the global supply and demand relationship for cotton can be changed. For example, with China's cotton reserve releases, the raw material costs in Vietnam next year will be higher than in China, so China's competitiveness will naturally increase, and the demand for the cotton industry will increase significantly.
A reporter from the Futures Daily learned from the USDA's February supply and demand report that global cotton production fell slightly by 37,000 tons to 222,074,000 tons, and global cotton consumption fell by 292,000 tons to 24,437,800 tons, a significant decrease. In addition, China's cotton production and ending stocks remain as predicted in the January supply and demand report, with consumption down 109,000 tons and imports down 109,000 tons. The reduction in imports is entirely due to the decline in consumption.
Wei Gangmin finally stated that weak economic recovery and state cotton reserve releases continue to dominate cotton prices. Before the implementation of the reserve release policy, cotton prices remain pessimistic, and the real turning point will come from the implementation of the reserve release policy.

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2017 Chairman Interview: Integrating Resources to Provide Effective Services to Consumers

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Chairman's Interview (2015): My View on the Cotton Situation

Leaders from Xiamen C&D Group visited Tongzhou for investigation and guidance

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Leaders from Xiamen C&D Group visited Tongzhou for investigation and guidance
Tongzhou Cotton Market Brief, Week 1 of March 2025

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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.

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Tongzhou Cotton Market Brief, Week 1 of March 2025
In 2024, China's exports of dyed and printed fabrics to Vietnam and Bangladesh increased significantly.

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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.

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In 2024, China's exports of dyed and printed fabrics to Vietnam and Bangladesh increased significantly.
President Huang Hongyu was invited to attend the 2025 Zhangjiagang Cotton Industry Development Conference

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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.

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President Huang Hongyu was invited to attend the 2025 Zhangjiagang Cotton Industry Development Conference

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