Fears of the short crop during the current season are keeping cotton prices at high levels. According to current reckoning, Pakistan may produce around 12.5 million bales of cotton (155 Kgs) during the current season (August 2015 / July 2016) on an ex-gin basis while the domestic mills may be consuming nearly 15 million bales. Thus import of nearly two million bales would be necessitated. Exporters may ship nearly half a million bales during the current season.
Consequently, seed cotton (Kapas / Phutti) prices have increased by Rs 150 to Rs 200 per 40 Kgs within this week. Thus in Sindh the seed cotton prices reportedly ranged from Rs 2700 to Rs 3000 per 40 Kgs on Thursday, while in the Punjab they are said to have ranged from Rs 2800 to Rs 3100 per 40 kilogrammes. Lint prices increased by Rs 200 to Rs 300 per maund (37.32 Kgs) this week, traders said. Thus in Sindh the lint prices were said to have ranged from Rs 4900 to Rs 5500 per maund in a tight market, while in the Punjab they reportedly ranged from Rs 5300 to Rs 5500 per maund, according to the quality.
It is now quite some time since the textile mills in Pakistan are facing hard competition from regional competitors with the result that about 30 percent of the domestic industry is closed and exports are claimed to have declined by more than 20 percent in September, 2015. Textile millers have been agitating since many months against lack of viability as regional competitors are being given large subsidies and incentives by their respective governments which are taking the Pakistan textile industry to a point of no return.
According to the claims of the Pakistan Textile Exporters Association (PTEA) and the All Pakistan Textile Mills Association (APTMA), huge funds of the industry are held up with the government which are not being refunded, incentives announced in textile policies remain unpaid, energy tariffs are not regionally competitive, Punjab based textile industry will not be given any gas supply during the coming winter and unjustified import policies have flooded the markets with imported textile products.
Last Wednesday APTMA called for a countrywide strike when mills were closed for a day to press the government for their demands. Media sources now quote Tariq Saud, Chairman APTMA, as saying that they have been contacted by Haroon Akhtar Khan, Special Assistant to the Prime Minister for Revenue and Minister of State, inviting APTMA for the negotiation of key issues and a delegation of APTMA will be meeting Finance Minister Ishaq Dar next Saturday.
Generally speaking, yarns and other textile items remain very weak in the domestic market. Thus the Pakistan textile industry is facing a very difficult time while several units have already closed down. On the global economic and financial front, there were a lot of hopes at the beginning of this calendar year that finally we would be getting out of the Great Recession (2008) and start recovering with economic growth and leave the recession behind us. It now appears that it may be several more years before we may start with a credible and lasting economic growth around the world in the near future.
First and foremost, Chinese deflationary data continues to deter several economies around the world from making any credible and lasting recovery. Several stock markets around the world slid on last Wednesday after consumer inflation in China reportedly slowed down more than was expected. Thus disappointing earnings from America and disappointing economic data from China were said to have brought down equity values at mid week.
As reported by Reuters on Wednesday, Britain's top share index FTSE fell for the third consecutive session. Indeed the European shares also fell at mid week both on Chinese economic weakness and also a slowdown in many overseas markets for luxury goods and demand for cars. Dow Jones reportedly slumped after weak economic forecast were projected for both United States and China.
For instance, German exports have recorded their largest slump in six years, besides facing a declining trade surplus. Eurozone as a whole also keeps suffering due to a lack of coherent and co-ordinated economic policy. Indeed the industrial production in August 2015 reportedly declined, particularly in Germany, Italy and Spain. It has been pointed out that due to the fall in industrial reduction in some core European countries, the consequential economic crisis could unhinge the European Union.
Of special interest and speculation remains the timing of the US Federal Reserve as to when it will increase the interest rates. Because the Federal Reserve has not yet increased the interest rates, and may not do so this year, it is generally construed that the American economy has not yet recovered satisfactorily and thus stimulus measures should be continued. Same is the case for continuing stimulus measures in China, Japan and elsewhere.
Of special interest these days is the widening interest of China in projects and proposals to expand economic co-operation and partnership in the Asia and Pacific region. Thus Apec (Asia Pacific Economic Corporation) was formed to promote economic co-operation between its 21 members. Similarly, the CPEC (China-Pakistan Economic Corridor) has been formed and is an ongoing development megaproject with the aim to connect the port of Gawadar in south-western Pakistan to China's north-western autonomous region of Xinjiang through a network of highways, railways and pipelines to transport oil and gas. The economic corridor is said to be central to China-Pakistan relations and as per Wikepedia will run 3000 kilometers from Gawadar to Kashgar.
China has also recently reported to have launched the China International Payment System in Shanghai last week which is said to provide an alternative to offshore banks for cross-border Yuan clearing. It has been further added that the system which is presently in its initial phase will serve both domestic and foreign financial institutions. Thus China is taking important steps to further integrate and expand the global economic and financial systems.
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