KARACHI: Bearish trend continued in cotton market. The rate of cotton affected by rain reached at the lowest level of Rs 14,000 to Rs 14,500 per maund. Heavy rains are expected to affect the cotton crop. Fluctuations in the rate of New York cotton remain remarkable.
Textile sector protests due to government’s neglecting attitude. Textile sector warned that they will shut their mills if the crisis continues.
The local cotton market continued to decline during the last week due to rains in the three cotton-producing provinces of Sindh, Punjab and Balochistan and due to extraordinary decline in the price of cotton in the international cotton market. The price of cotton further declined by Rs1000 to Rs1500 per maund and reached at the lowest level of Rs. 15,000 to Rs. 15,400 per maund. The rate of low quality rainy cotton is in between Rs 14,000 to Rs 14,500 per maund. The rate of Phutti witnessed a decline of Rs 500 to Rs 700 per 40 Kg.
There is a crisis like situation in the market as well as the quality of cotton was effected due to rains.
On the other hand, the cotton yarn market is in a state of crisis. The government suspended the supply of gas to the textile mills of Punjab from July 1 to July 7, due to which APTMA held a press conference against it and strongly condemned it. The Prime Minister took notice and summoned the leaders of APTMA to Islamabad on the day when gas was going to be restored.
On the other hand, the textile sector has been complaining of energy shortages, rising energy prices and prolonged load shedding, as well as rising interest rates. As a result of which cotton looms and sizing sector have stopped their operation. There are also reports that due to the issues of supply of cotton yarn, many textile spinners have closed mills even during Eid-ul-Adha holidays.
Due to the continuous decline in the flow of cotton, the business volume remained relatively high. Due to the rains, ginners continued to sell cotton and textile mills continued to buy cotton.
Cotton growers are worried about the declining flow of cotton because of the high prices of pesticides and fertilizers used to protect the cotton crop. If not, they will not get pesticides on reasonable rates they will be unable to protect the cotton crop. As a result, there is a possibility that it will have a bad impact on cotton production.
In Sindh province, the price of cotton was Rs. 14,000 to Rs. 15,500 per maund. The rate of Phutti is in between Rs 6,000 to Rs 6,800 per 40 kg. The rate of Khal and Banola witnessed a decline.
The rate of cotton in Punjab is in between Rs 16,000 to Rs 16,400 per maund. The rate of Phutti is in between Rs 6,000 to Rs 7,000 per 40 kg.
The price of cotton in Balochistan was Rs. 15,500 to Rs. 16,000 per maund. The price of Phutti was in between Rs. 6,500 to Rs 7,000 per 40 kg. The rate of Khal and Banola remained low.
The spot rate committee of Karachi Cotton Association reduced the spot rate by Rs 700 per maund and fixed the spot rate at Rs 16,000 per maund.
Naseem Usman, chairman of the Karachi Cotton Brokers Forum, said rate of Future Trading of New York Cotton had fallen by 6 US cents per pound. The Rate of Future Trading of New York Cotton for the month of December after breaking the psychological barrier of one dollar reached at the lowest level of 88 American cents. Later, news of China’s purchase of 3 lac to 5 lac tonnes of reserve cotton pushed New York cotton prices back to about 96 US cents. According to the USDA’s weekly export and sales report, 37,400 bales were sold for the year 21-22 witnessed a decline of 22 percent as compared to the previous week.
Turkey topped the list with 14,700 bales. Vietnam came in second with 13,200 bales. China came in third with 10,000 bales. 3 lac 81 thousand 900 were sold for the year 2022/2023.
Pakistan topped the list with 98,700 bales. Turkey came second with 95,500 bales and Bangladesh came third with 66,100 bales.
The value-added textile export industry of Karachi on Thursday slammed the PML-N led federal coalition government for “utter” silence on their SOS calls regarding the cut-off of legitimate gas supplies to the manufacturing units, which is causing huge financial losses to the industrialists.
“The industries cannot operate without gas which causes them colossal financial losses,” a group of representatives from the value-added textile export sector associations of Karachi told a news conference at the PHMA House.
They said that are “deeply shocked” and completely “disappointed” with the federal coalition government, Prime Minister and his economic and energy team for ignoring the SOS calls from Karachi-based textile industry, as their productions are nearing to a stop with no gas supplies.
They demanded of the Prime Minister to intervene immediately to solve the crisis. The city’s exporters are “highly hopeless” under the present circumstances that may bring their businesses to a closure and relocate their industry abroad, they said. “The industries of Karachi have been deprived of its legitimate gas share for the last several decades,” they said adding that PM Shehbaz Sharif has ignored Karachi-based industries like his predecessors did in the past.
“On other hand, prime minister has been holding meetings with the spinners association of Punjab,” they said adding that the ECC has increased RLNG rates from $6.5 mmbtu to $9 mmbtu without consulting with the industry stakeholders from Karachi.
Locally produced gas will be made available at Rs 1,350 per mmbtu or $6.6 mmbtu with an increase of 65 percent for Sindh and RLNG at $9 mmbtu for the SSGCL consumers, which they termed “unjustified and unacceptable”.
The PTI government had approved RLNG $6.5 mmbtu tariffs for export-oriented industries across Pakistan but the same was implemented only for the SNGPL consumers, excluding the SSGCL subscribers, they said.
RLNG supplies for industrial consumers were charged in January 2021 at Rs1361 per mmbtu, which was increased till June 2022 to Rs 4626 per mmbtu. Last fiscal year, the government disbursed Rs81 billion against the subsidy on RLNG Competitive Tariff in Punjab only, they added.
They also demanded of the government to make 110 mmcfd gas allocations each from Ghotki and Marri to SSGCL and SNGPL, respectively. “Karachi’s exporters are of a confirmed view that their calls will not be answered, as there is no one in the incumbent federal government to see the situation on merit,” they said. They also felt that there may be some “ulterior” motives to target Karachi’s industry purposely and victimize it to a point where they could make a decisive step to relocate their units abroad.
“The export industries of Karachi are also victimized and denied of other alternate fuel,” they said that a subsidy is given only to Punjab. A subsidy, which is given to Punjab, is mainly made from taxes that Karachi produces, they said. They asked the federal government to stop the “discrimination” against Karachi, as the country’s largest city generates 70 percent of the total national revenues and contributes 54 percent in total national exports and 52 percent in textile ones.
They said that the textile sector performed last fiscal year 2021-22 with a $4 billion export growth of which $2 billion share was by the Karachi’s industry, adding that the government punishes it for a sizeable foreign exchange gains.
They said that the federal government under the guise of export facilitation supports Punjab’s industry ignoring Karachi completely, adding that the industry is also charged for a subsidy provided to domestic and fertilizer sector.
Karachi continues to suffer for the last 35 years because of an infrastructure dearth, water scarcity, power and gas, “extortion” and disorder with spontaneous street crimes and lack of civic facilities, they added.
They asked the federal government that as to why Karachi should bear the “brunt” of gas shortage alone; saying that there should an equal and fair treatment for entire country. They called the lack of legitimate gas supply to Karachi an “unconstitutional act”.
With no gas supplies to export industries, productions have completely stopped, they said. They added that several units will see a closure after Eid-ul-Azha that may unleash “massive” layoffs and a drastic decline revenues generation. The industry is also struggling with no alternative energy sources.
The textile sector has performed beyond “excellence” with $19.4 billion of exports up by 26 percent, or $4 billion, standing out with contributing to the total national exports of approximately $31.76 billion.
The 26 percent growth in value-added textile exports amounting to the increase of equal percentage in jobs, besides revenues and taxes. The associations saw the super-tax on the textile sector as a “punishment” by the government for its growth of $4 billion.
Over 40 allied industries of textile also excelled in their growth. Similarly, Karachi generates around 70 percent revenues to the national exchequer. Karachi also took the lead in the country’s total textile exports by 50 percent, they said.
Those spoke at the news conference included: Jawed Bilwani, Chairman, Pakistan Apparel Forum & Chief Coordinator, Value Added Textile Forum, Abdul Rehman, Chairman, Abdul Qadir Bilwani, Sr. Vice Chairman, Faisal Arshad Sheikh, Vice Chairman, Pakistan Hosiery Manufacturers & Exporters Association, Kamran Chandna, Chairman, Pakistan Knitwear and Sweater Exporters Association, Shaikh Shafiq Jhokwala, Chairman, Pakistan Readymade Garment Manufacturers & Exporter Association, Kashif Mahtab Chawla, Chairman, Towel Manufacturers Association of Pakistan, Abdul Samad, Former Chairman, Pakistan Cloth Merchants Association and various other representatives and exporters of the sector.
Severe energy crisis and rising markup rates have hit the textile industry, with reports of closure or non-operation of about 400 textile mills in Punjab after suspension of gas supply to the industry. The energy crisis also hit the power looms and sizing industry.
The whole cotton industry is in a state of shock. However, Prime Minister Shahbaz Sharif’s promise to provide gas and electricity at subsidized rates to the owners of textile mills after Eid-ul-Adha has caused a wave of satisfaction in the industry.
Chairman Cotton Ginners Forum Ehsanul Haq said that after two decades Pakistan’s textile industry was booming due to large export orders.
The textile sector is now fighting for its survival due to the recent extraordinary rise in electricity and gas prices, record increase in mark-up rates and subsequent complete gas suspension. He said that the downward trend in cotton prices continued throughout the world including Pakistan during the last week during which the prices of cotton in Pakistan fell by Rs 6,000 per maund. While the price of Phutti in the last one and a half months due to the textile crisis and a sharp decline in international markets reached at Rs 6,500 per 40 kg from Rs 10,500 per 40 kg.
He also said that after many years, China has decided to buy three to five lac tonnes of cotton from international markets for its state reserves. Cotton prices are on the rise all over the world, including Pakistan, and the New York Cotton Exchange has seen a rise in prices of up to four cents per pound due to the long-term upward trend in cotton prices. He further said that there were reports of severe damage to cotton crop due to heavy rains in all Cotton Zones of Sindh and Punjab.
Copyright Business Recorder, 2022
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