Tongzhou Cotton Market Brief, Week 2 of December 2022
I. Zhengzhou Cotton
(A) Bullish Factors
1) After the complete lifting of epidemic restrictions, logistics have resumed across the country, and the operating rates of yarn and fabric mills have recovered, leading to increased production and sales rates. Market confidence in downstream sectors has also seen some recovery, with some yarn mills reporting that finished goods inventories have fallen to low levels.
2) Yarn and fabric mills' raw material inventories are at a historic low. With the continuous rise in futures prices, downstream confidence has increased, and traders and fabric mills have made noticeable replenishment moves, indicating a clear improvement in the downstream sector.
3) Domestic cotton has a competitive price advantage over foreign cotton, with significant buying interest below 13500.
(B) Bearish Factors
1) The Zhengzhou Cotton Index saw a significant increase in open interest of 190,000 lots, with prices rising by 1000 yuan. The bulls have been aggressively pushing prices higher for 7 trading days. Considering the historical duration of such large increases in open interest, it is expected that a phase of directional uncertainty might emerge this week due to capital market competition.
2) While the operating rate of yarn mills has seen a significant rebound, the response is less noticeable closer to the end consumer market. The end-user clothing market still lacks orders; there's no improvement in the order situation.
3) Following the lifting of epidemic restrictions, the number of infections surged in Beijing, Hebei, and other regions starting last week. In the short term, the spread of the epidemic will likely prevent improvements in residents' consumption and income.
II. US Cotton
(A) Bullish Factors
1) From an agricultural product price comparison perspective, the price ratio of cotton to soybeans and cotton to corn is at a historically low level. This indicates that cotton has experienced a larger decline compared to other agricultural products, and the current agricultural product price ratio is unfavorable for next year's cotton planting.
2) Funds are cautiously bullish. In the latest week, the net long position of funds increased by 1 percentage point to 9.6% week-on-week, and non-commercial long positions increased by 1455 contracts to 65,000 contracts week-on-week.
3) US cotton has strong support around 80 cents. The USDA's December report significantly reduced global consumption by 710,000 tons, but prices have still not fallen below 80 cents, demonstrating strong buying interest around this level.
(B) Bearish Factors
1) US textile and apparel imports in October fell 3.58% year-on-year and 11.3% month-on-month, with cotton textile imports down 25% year-on-year. Weak end-user demand in the US has led to an active destocking cycle.
2) Weekly US cotton sales are at their worst in nearly a decade. US cotton demand continues to decline, with no spot demand for 80-82 cents US cotton, leaving prices without support.
3) Increased cotton supply from India later will put pressure on the market and prices.
Points to Watch: December interest rate meeting
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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