KARACHI: Domestic and international cotton prices continued to decline, amid very low business volume.
The World Agricultural Supply and Demand Estimates (WASDE) monthly cotton production and consumption report was overall very negative. There could be an overall sharp downturn in the international cotton market.
There is an increase in financial crisis in textile and ginning sector. Financial crisis has intensified due to December bank closures.
Pakistan Yarn Merchants Association has warned that if five percent duty is not reduced, 0.8 million looms will be closed.
All Pakistan Textile Mills Association has appealed the government to restore ‘Zero Rating’ while Energy Minister has given assurance to the ginners that their problems will be solved.
In the local cotton market, there was over all a bearish trend due to cautious buying by textile mills and spinners during the past week. The business volume remained low. Cotton stock is piling up with the ginners.
At present, ginners are producing low quality cotton and selling it at low prices. They had stored the high quality cotton, hoping an increase in prices. As their expenses are increasing, the ginners are perturbed due to the additional cost of stocking.
On the other hand, textile spinners have already bought cotton at high prices and they are worried a lot, as there is no buyer of cotton yarn and textile products in the market.
There is also no buyer of cotton in local market because of no export orders. Many mills are willing to sell their products at low prices but no buyer is willing to buy at any price.
Moreover, exporters are facing difficulties in opening of Letter of Credit for import and export of goods by banks due to non availability of US dollars.
According to the reports thousands of containers were stuck up on ports and demurrages were increasing due to which business and industrial circles are very worried about. There is a huge financial crisis in the market. Due to the bank closures in December, the crisis has become more intense. Businesses are virtually at a standstill.
On the other hand, the rate of US dollar is increasing in the open market day by day. Dollar reached at the highest level of Rs 250 to Rs 265 in the open market. The flow of dollar at this rate is very low. According to the relevant people the rate of the US dollar can be further increased.
The rate of cotton in Punjab and Sindh is in between Rs 13,500 to Rs 17,000 per maund. The rate of Phutti is in between Rs 5,000 to Rs 8,200 per 40 kg.
Cotton is available at Rs 15,000 to Rs 17,000 in Balochistan in a very limited quantity.
The Spot Rate Committee of the Karachi Cotton Association kept the rate unchanged at Rs 16,500 per maund. Chairman Karachi Cotton Brokers Forum Naseem Usman has said that overall there was bearish trend in international cotton markets after fluctuations. The rate of Future Trading of New York Cotton closed at eighty American cents per pound. The bearish trend in the rate of cotton remained continued in India.
Cotton Association of India had appealed to their government to abolish 11 percent import duty because the rate of local cotton in India is more than the imported cotton due to which the local textile sector is suffering.
According to USDA’s weekly export and sales report, sales for the year 2022-23 were 32,600 bales.
China was at the top by buying 11,000 bales. Bangladesh followed by buying 7,300 bales. Turkey bought 6,500 bales and stood at the third place.
As many as 26, 400 bales were sold for the year 2023-24.
Pakistan was at the top by buying 22,000 bales. Turkey bought 4400 bales and came second.
WASDE has reported a sharp decrease of 2.83% in consumption compared to the monthly world production of cotton, while the ending stock also showed a sharp increase of 2.62%.
According to the report, world production decreased by 7 lakh bales to 115.73 million bales while world consumption decreased by 3.25 million bales to 111.70 million bales. The world ending stock was reported to be 89.56 million tonnes with a decrease of 22 lakh bales. This negative report can cause a huge bearishness in the market.
Meanwhile, Pakistan Yarn Merchants Association (PYMA), while rejecting the Economic Coordination Committee’s (ECC) decision to impose 5% regulatory duty (RD) on Polyester Filament Yarn, the primary raw material of textile industry, has said that move would lead to destruction of 8 lakh power looms, the lifeline of Textile Industry.
The association appealed to Prime Minister Shehbaz Sharif and Finance Minister Senator Ishaq Dar to suspend the ECC decision to save the SMEs sector of Pakistan from destruction.
“The government should issue directives not to impose RD on Yarn in the best economic interests of the country. Otherwise, SMEs will be shut down and millions of workers will be unemployed.”
All Pakistan Textile Association (APTMA) also urged the federal government for immediate restoration of ‘Zero Rating’ for the entire textile value chain in order to make available working capital for a cash-strapped textile industry.
Gohar Ejaz, Patron in Chief APTMA, in a letter sent to Federal Finance Minister Ishaq Dar has highlighted the issues being faced by the textile industry and requested the federal government for supply of gas priority for export sector, zero rating regime for textile sector, payment of pending refunds, waiver of demurrage charges and make available forex for cotton and other raw materials.
“These issues need to be addressed for the textile sector to maintain & grow exports to contribute at par in line with capacity towards a sustainable Balance of Payments,” he said.
However, Federal Minister for Energy Engineer Khurram Dastgir Khan discussed fixed charges and zero rated industry in a meeting with the delegation of Pakistan Cotton Growers Association. The Federal Minister assured that all out efforts would be made to solve the problems presented by the association and instructions will be issued to the concerned quarters.
Copyright Business Recorder, 2022
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