Cotton prices again came under pressure due to expectation of increasing seedcotton (kapas/phutti) arrivals, problems with certain sectors of the domestic textile industry, weak domestic yarn prices and overall fall in the New York cotton futures prices over the past several sessions. Therefore, on Thursday the mills buying became restrained.
Consequently, the Karachi Cotton Association (KCA) reduced the ex-gin price of Grade 3 cotton by Rs 15 per maund (37.32 kgs) to Rs 2460 per maund. The cotton season (2006-07) is moving into full swing after leaving most of the weather concerns behind.
With the advancing cotton season, a ginning factory in Balochistan has also started functioning. Cautious buying by the mills did not signify any fear of cotton prices taking a higher path at present.
The Pakistan Cotton Ginner's Association (PCGA) issued its first fortnightly seedcotton arrivals report showing receipt of a total of 1,103,264 lint - equivalent bales throughout the country for the current season (2006-07) till the first of October 2006. The PCGA report shows that 336 ginning factories were operative in Punjab till the 1st of October 2006, while in Sindh 120 factories were working for the same time period. These figures show that a shortfall of 13.37 percent has been recorded up to the beginning of this month compared to the last season (2005-06)
because the current cotton season in Pakistan was late by a few weeks, the PCGA report could be giving a skewed impression of the seedcotton arrival figures which may not fall short but increase over the forthcoming three or four weeks. Particularly, though damage was certainly done by the inclement weather in southern Sindh, later on there appeared to be better prospects for the cotton output there because of improved recovery. Therefore, the national lint output would probably exceed last year's production of 12.5 million bales (170 kgs) on an ex-gin basis.
The price of seedcotton (kapas/phutti) in Sindh reportedly ranged from Rs 1100 to Rs 1150 per 40 kgs, while in the Punjab it was said to have ruled between Rs 1150 to Rs 1200 per 40 kilogrammes. Lint prices in Sindh are said to have ranged from Rs 2400 to Rs 2490 per maund, while in the Punjab they are said to have ranged from Rs 2490 to Rs 2525 per maund. According to the ginners, the prices of seedcotton are higher compared to the desirable prices of lint so that they find it difficult to attain the necessary corelation or parity between the two price levels.
Cottonseed (kapas/binola) prices in both Sindh and Punjab also decreased. On Thursday, the cottonseed price in Sindh reportedly ranged from Rs 420 to Rs 430 per maund (37.32 kgs), while in the Punjab they were said to have prevailed in the range of Rs 430 to Rs 440 per maund. With these features in the market, the impression was of a subdued condition with selective buying being conducted by the mills. Thus the turnover could also be low compared to last Wednesday.
Till the afternoon, the sellers were willing to sell their produce but there were no easy buyers from the mills sector. However, same exporters like Meezan, Haji Dossa, Naseem Enterprises, Dadasons and Jullandhar Industries were either buying cotton or making inquiries. If the exporters start their purchase operation in any meaningful way, the market may take a pause at these levels, otherwise the overall price tone of the market is towards the lower side.
According to trade talk, the micronaire readings of Sindh cottons are on the high side and are said to be ranging from 5 to 5.25. Therefore, though the grades and some other paramenters of most of the cotton from Sindh and Punjab are good, Sindh cotton is selling at a discount of Rs 75 to Rs 100 per maund compared to Punjab. Of course, cotton from such weather beaten areas as Mirpur, Sanghar and Hyderabad districts are also selling at higher discounts.
In the afternoon, brokers in Karachi reported that 1000 bales of cotton from Tando Adam in Sindh sold between Rs 2400 to Rs 2450 per maund (37.32 kgs); 600 bales from Sanghar sold at Rs 2425 per maund; 200 bales from Kot Diji and 400 bales from Moro sold at Rs 2440 per maund each, while 600 bales from Nawabshah are said to have been sold at Rs 2450 per maund.
In recent months the textile industry in Pakistan has become cognisant of the fact that they are not doing well since the withdrawal of the Multi-Fibre Agreement (MFA) from January 2005 when quota-free system was introduced in global textile trade. Domestic mills feel that they face an uphill task due to competition from neighbouring countries, an euphemism for China, India and Bangladesh who enjoy some extra facilities for exporting their goods in the global markets.
The government of Pakistan decided last month to allow five percent research and development (R&D) to home textile across the board by withdrawing its earlier provision of requiring in-house dyeing, processing and printing facilities to be eligible for the facility. At the end of last month Prime Minister Shaukat Aziz directed the National Textile Strategy Committee (NTSC) to submit its final recommendation by the end of December 2006 to work out a national textile strategy to make the industry more competitive and functional in the face of competition purportedly arising out of subsidies, fiscal incentives and other facilities being given by the governments of India, China and Bangladesh to their textile industries. This step should go far to ascertain the problems of our domestic textile industry and also to provide remedial measures to put them at par with their neighbourly competitors.
Akbarali Hashwani, a veteran of the cotton trade, has been elected as the chairman of the Karachi Cotton Association for the year 2006-07, while Sohail Naseem, a prominent exporter and spinner as its vice chairman. those elected as directors of kca are Ahmad Haji Ebrahim, Asif Inam, A. Shakoor Dada, Nadershaw D. Kabraji, Zahid Mazhar, Anwar Yasin, Fayyaz Umar, Khawaja Tahir Mahmood, Mahesh Kumar, Mohammad Khyzar Yousuf, Mohammad Sohail, Nadeem Maqbool, Wahid S. Balagamwalla, Parvez Hassan and Shahid Shafiq, Mian Shafqat Ellahi Sheikh, a leading member of the well-known Nagina group having wide interests in textile and other business has been elected as the new chairman of the All Pakistan Textile Mills Association (APTMA).
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