Weekly Cotton Review: Rates fall amid dull trade; textile sector under focus

KARACHI: A bearish trend prevailed in cotton market previous week, which saw a. significant reduction of Rs 2,500 to Rs 3,000 per maund in the rate. The Spot Rate was also decreased by Rs 2,500 per maund.

Former President Asif Ali Zardari met with members of All Pakistan Textile Mills Association (APTMA) to discuss the issues regarding revival of economy, cotton and textile sector.

The intervention price of Phutti has come down from Rs 8500 per 40 kg. Growers say as promised, the government should buy cotton through Trading Corporation of Pakistan (TCP) in order to stabilize the price.

Chairman Pakistan Apparel Forum Javed Bilwani has said that government should avoid implementation of RCET under Section 99D on textile sector.

In the local cotton market last week, cotton prices fell by Rs 2,500 to Rs 3,000 per maund due to panic selling by ginners and buying by spinning mills on low rates leading to a chaos in the market.

The price of cotton after decreasing reached at Rs 17,000 to Rs 18,500 per maund while the price of Phutti per 40 kg decreased by Rs 800 to Rs 1,000 and reached at Rs 7,000 to Rs 8,000 in Sindh province. Similarly, the spot rate of cotton, after decreasing by Rs 2,200 per maund, reached at Rs 17,700.

Cotton prices are expected to fall further after Eidul Azha due to crisis in textile sector.

As Eidul Azha is approaching, there is also the issue of transportation as many transport vehicles would be busy in delivery of the sacrificial animals.

Due to the Eid, there will be no business in next week and many mills have announced long holidays. APTMA has hinted to stop business from July 1 if their demands are not met.

The government has fixed the intervention price of Phutti at Rs 8,500 per 40 kg and promised that if the price of Phutti falls below Rs 8,500, the government will purchase about one million bales of cotton through Trading Corporation of Pakistan to stabilize the price of cotton. At this time, the price of Phutti has fallen to a low level of Rs 7,000 to Rs 7,500 per 40 kg in many areas. Cotton farmers are demanding that the government should start purchasing cotton through TCP as promised.

On the other hand, the central leader of APTMA, Gohar Ijaz, said in a TV interview that this year, his representative cooperated with the relevant institutions of agriculture of the Punjab government to increase the cotton crop.

As a result of which cotton was cultivated on 50 lac acres of land as compared to last year in which cotton was cultivated on 32 lac acres due to which this year it is expected that Punjab alone is expected to produce around one Crore bales of cotton.

While Sindh province is also expected to produce 30 to 40 million bales due to better cultivation, according to him, if the weather conditions in the country remain favourable, the total production of cotton is expected to be 1 Crore 30 to 40 lac bales.

Although the government has set a cotton production target of 1 Crore 27 lakh 70 thousand bales, many experts are of the opinion that production may barely touch one Crore bales. It is still too early to say anything about cotton production.

The rate of cotton in Sindh is in between Rs 17,000 to Rs 18,000 per maund. The rate of Phutti is in between Rs 7,000 to Rs 7,700 per 40 kg. The rate of cotton in Punjab is in between Rs 18,500 to Rs 19,000 per maund while the rate of Phutti is in between Rs 8,500 to Rs 8,800 per 40 kg. The rate of cotton in Balochistan is in between Rs 17,700 to Rs 18,000 per maund. The rate of Phutti is in between Rs 7,500 to Rs 8,200 per 40 kg.

The Spot Rate Committee of the Karachi Cotton Association has decreased the spot rate by Rs 2,200 per maund and closed it at Rs 17,700 per maund.

Chairman Karachi Cotton Brokers Forum Naseem Usman has said that overall a bearish trend prevails in international cotton markets. The rate of Future Trading for the month of July after decreasing closed at 78 cents.

According to the USDA’s weekly export and sales report for the year 2022-23, 42,700 bales were sold. Bangladesh was at the top by purchasing 35,400 bales.

China bought 33,600 bales and was in second place. Taiwan bought 6,900 bales and was ranked third.

One lakh 87 thousand and six hundred bales were sold for the year 2023-24. China was at the top by buying one lac thirty seven thousand and three hundred bales. Turkey bought 24,400 bales and was on the second place. Honduras was third with 10,900 bales.

However, local textile millers have warned the government that a large number of export units may be shut down as they have lost their competitive edge after end to the Regionally Competitive Energy Tariff (RCET).

The APTMA has again repeated its demand of resuming gas and electricity supply at concessional rates and warned the failure to do so would cause unemployment, loss of export revenue and further deterioration in the trade balance.

In a letter to Prime Minister Shehbaz Sharif, APTMA Pattern-in-Chief Gohar Ijaz urged him to restore the Regionally Competitive Energy Tariffs (RCET) for the export industry.

He noted that the government, in spite of the fiscal challenges, continued with the RCET facility for most of the year; however, the withdrawal at a time when the country was in need of foreign exchange could only be described perplexing.

According to Ijaz, the RCET does not require any subsidy and is more or less equal to the cost of service. The subsidy arises as a consequence of the Nepra tariff regime that cross-subsidies other sectors and underperforming Discos. These should in all fairness be funded directly by the government as part of their socio-political obligation.

The letter reads that the absence of a viable energy tariff could result in the closure of 75 per cent of the industrial establishments in Punjab within the next three months.

It added that the impact of non-continuation of the RCET would not be limited to the large-scale manufacturing (LSM) sector, but was also going to affect small and medium enterprises (SMEs) and cottage industries.

Meanwhile, former President Asif Ali Zardari met APTMA leaders regarding the revival of economy, cotton and textile sector.

In addition, Javed Balwani, head of Pakistan Apparel Forum, which consists of representatives of Pakistan’s textile sector, has said that value-added textile exporters are worried about the proposed implementation of additional tax on “income, profits, gains and gains” under Article 99D. They rejected this and termed it as a “harsh and anti-business” move by the government.

Textile exporters are already burdened by ever-increasing operational costs of manufacturing for exports. The super tax has been extended for one year and has been extended to the second year. The current government has earlier abolished the Regional and Competitive Energy Tariff (RCET), depriving the exporters of a level playing field and a fair competitive environment.

Copyright Business Recorder, 2023