Saw this article has cotton in it, no other news...
China Trades Enough Cotton in One Day to Make Jeans for Everyone
2016-04-27 10:53:38.833 GMT
By Alfred Cang
(Bloomberg) -- It’s not just metals caught up in China’s
commodity fever.
The equivalent of 41 million bales of cotton traded in a
single day on the Zhengzhou Commodity Exchange last week, the
most in more than five years and enough to make almost 9 billion
pairs of jeans, or at least one for every person on the planet.
Prices that had slumped to the lowest on record in February
surged almost 19 percent in the four days leading up to the
trading spike on Friday.
Traders have piled in to Chinese commodity markets, sending
volumes of everything from steel to coking coal soaring and
prompting exchanges to boost margins and fees or issue warnings
to investors. The surge in trading is reminiscent of last year’s
equities rally that boosted the stock market before a rout
erased $5 trillion. China is the world’s largest consumer of
cotton and second-biggest producer.
“Record low levels in February and March sparked buying
interest from both inside and outside of the cotton industry and
also triggered speculation, which resulted in mounting bets in
Zhengzhou futures,” said Liu Qiannan, a Beijing-based cotton
analyst at Galaxy Futures Co. “With massive investment and
encouragement from the crazy steel and iron ore market in China,
sentiment then turned to bullish from bearish.”
More than 3.6 million contracts of 5 metric tons apiece
traded in Zhengzhou on Friday. With Chinese exchanges double
counting volume to account for the long and short side of a
trade, that’s still about 9 million tons, or 41 million bales.
One bale can make 215 pairs of jeans, according to the National
Cotton Council of America.
On the same day, about 1.6 billion pounds traded on ICE
Futures U.S. in New York. That’s about 3.3 million bales, or
more than 700 million pairs of jeans, enough to dress only the
U.S., Brazil and Japan in denim.
Cotton History
China’s cotton purchases have been in the spotlight before.
In 2011, the government set a minimum price and began
stockpiling the commodity to support domestic growers. That
encouraged them to hoard the material and caused a jump in
futures to an all-time high in March of that year.
In response to the trading frenzy, the Zhengzhou exchange
this week raised trading charges for cotton futures to 6 yuan
per lot from 4.3 yuan and said it will raise margin requirements
and daily trading bands for all futures for the coming Labor Day
holiday. Nobody answered two calls to Zhengzhou Commodity
Exchange’s news and propaganda department outside business
hours.
The steps by Zhengzhou and other bourses including the
Dalian Commodity Exchange are making it more expensive for
investors to trade commodities futures in China. Morgan Stanley
has said the surge in speculative trading had stunned global
markets, citing a jump in activity for eggs and cotton as well
as iron ore and steel.
Goldman Sachs Group Inc. has expressed concern about the
surge in speculative trading in Chinese iron ore futures, saying
that daily volumes are now so large that they sometimes exceed
annual imports.
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