President Huang Hongyu: Implementing steady operations in three aspects, the domestic market "neither strong nor weak"

President Huang Hongyu: Implementing steady operations in three aspects, the domestic market "neither strong nor weak"
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  • President Huang Hongyu: Implementing steady operations in three aspects, the domestic market "neither strong nor weak"
At the roundtable forum of the 2024 CNCE Cotton Industry Development Annual Conference held on March 21, Mr. Huang Hongyu, President of Henan Tongzhou Cotton Industry Co., Ltd., shared his views on the theme of "Business Strategies and Risk Management for Cotton Enterprises under the New Situation."
Regarding the company's business strategies and risk management experience, Huang Hongyu stated that Tongzhou Cotton has always regarded risk control as the foundation of the company's development, and has taken steady operation and steady progress as the keynote of its development, not pursuing profit maximization. This is implemented in three aspects: First, ensuring that the company does not make directional mistakes. "Doing what we should and not doing what we shouldn't." When uncertain, reduce the scale of operations. Small mistakes can be made, but absolutely no major mistakes. Second, making good use of various financial instruments such as futures, options, and on-exchange and off-exchange transactions; considering the worst-case scenario for every transaction and hedging. Third, always using effect and profitability as goals, not blindly operating to expand scale. Currently, the characteristics of domestic cotton trade are: first, mainly based on basis trading with few one-price transactions; second, the participating entities are constantly expanding, and the team is becoming younger. In terms of specific operations, everyone feels that basis trading is more difficult this year, and the market trading methods are homogenized, so enterprises need to break the deadlock, continuously optimize the basis by using futures price fluctuations, and reduce costs through tools such as trade with rights.
Regarding the problem last year where ginneries purchased at high prices, but the recovery of textile mills did not meet expectations, increasing the difficulty of risk control for trading companies, Huang Hongyu pointed out that to solve the problem of "unable to buy cotton at low prices and unable to sell at high prices," the solutions are: First, cooperate with ginneries, giving play to the advantages of traders' funds and risk control experience, obtaining income by providing value-added services. Second, seize opportunities; ginneries are accustomed to one-price sales, and traders can use futures price fluctuations to purchase when futures prices are high and basis is relatively low to obtain income. Third, locking basis and using OTC options for pricing, especially using accumulative purchase options for pricing when futures volatility is large.
Regarding the future outlook for the cotton market, Huang Hongyu pointed out that the current domestic contradictions are not prominent, it is a situation of "neither strong nor weak." However, as time goes on, spinning mills lack the motivation to stockpile cotton at the current price level from a profit perspective. It is expected that cotton prices will fluctuate within a small range in the short term. The future market needs to focus on the follow-up order situation and the acceptance level of cotton prices by textile enterprises. From the perspective of foreign markets, the recent market is in an irrational state of speculating on structural contradictions. We should be wary of risks: futures prices are rising, but basis is falling sharply, indicating that spot prices are not following futures prices. If the price continues to rise, the probability of a future decline is high. However, the future pattern of cotton price differences being "stronger abroad and weaker domestically" may become the norm. Under the increasingly deteriorating international environment, how much of the "cake" of inventory replenishment in Europe and the US can be allocated to China remains a question.
 

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Our company's "Tongzhou Running Team" successfully started its 2024 run.

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Mr. Wei Gangmin, Chairman of our company, presided over the 9th meeting of the 4th council of the China Cotton Association and the National Cotton Situation Analysis Meeting.

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

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.

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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

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.

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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.

In 2024, China's exports of dyed and printed fabrics to Vietnam and Bangladesh increased significantly.

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

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

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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