WEEKLY COTTON REVIEW: bearish trends observed in market

The rate of quality cotton remained stable while there was almost no buyer of inferior quality cotton. Ginners were nervous. Over all bearish trends was seen in the market. Indian textile was facing heavy financial crunch. Local textile sector can come out of crisis if government releases the stuck up refund amount worth of billions. The government assured to take back the imposition of 5% to 8 % sales tax on Khal.

In the local cotton market during the last week the prices of cotton remained over all stable because of continuous buying by the textile and spinning mills. Although due to the low buying of quality cotton the downward trend was seen in the prices of cotton. The ginners dealing with trading of low quality cotton were in panic. Mixed trend was seen in trading volume. The big textile groups were involved in signing import agreements of cotton. According to the received information up till now the importers had signed agreements for the import of 32 lac bales of cotton while more agreements were in pipe line. According to the local textile sector, spinners this year will import 60 lac bales of worth 1.75 billion dollars.

In Sindh the price of cotton is in between Rs 7000 to Rs 9200 per maund while the rate of Phutti is in between Rs 2600 to Rs 4150 per 40 Kg. In Punjab the rate of cotton is in between Rs 8500 to Rs 9200 per maund while the rate of Phutti is in between Rs 3200 to Rs 4300 per 40 Kg. In Balochistan the rate of cotton is in between Rs 8300 to Rs 8800 per maund while the rate of Phutti is in between Rs 3600 to Rs 4400 per 40 Kg. The overall increasing trend was seen in the prices of Banola, Banola oil and Banola Khal due to low production.

The Spot Rate Committee of Karachi Cotton Association has stabled the rate of cotton at Rs 9000 per maund.

Chairman Karachi Cotton Brokers Forum Naseem Usman told that bearish trend was seen in international cotton market. In the New York Cotton Market due to the news of production of cotton in America and in the weekly export report of USDA exports decreased by 34 % as compared to last week and due to stalemate in America and China trade conflict the downward trend was seen in the Rate of Promise (Waday Ka Bhao) of New York Cotton.

According to the report of USDA Pakistan was the second large importer of American cotton during the current week but it is a matter of concern that China cancelled the agreements of import of 24200 bales of American cotton. However, during the last two weeks China had signed agreements with America for the import of thousands of bales which gave the impression that there is some progress regarding America and China trade conflict but it looks that the matter was pended.

Moreover, mixed trend was seen in the prices of cotton in China while bearish trend was seen in the prices of cotton in India. This year Indian textile sector was facing heavy financial crunch. According to the information received there was slow down in the cloth market of India. 40 % decrease was witnessed in cloth buying. The stocks were piling up because buying of cloth is less than the production. During the last one year there is slump in the ginning, spinning, processing, weaving, composite mills and power looms sector.

According to the estimates 30 percent to 40 percent decrease was witnessed in the production of cloth and products made of cloth. The effects of decrease in the prices of materials used in production of cloth products such as cotton and yarn were seen on the rate of cloth and its prices were decreased. A senior trader of cloth Industry in India said that they had not seen such a bad situation in cloth market before. There was a delay in payments of six to eight months to textile and clothing industry due to which financial crisis was created in the market. Banks had put the textile and clothing business in negative category and banks were hesitant to issue new loans.

Moreover, Prime Minister Imran Khan during a ceremony handed over cheques of sales tax refund of worth Rs 30 billion issued to the importers in the form of bonds on which there was no bank guarantee due to which the textile mills refused to take it. However payment of amount of sales tax refund of Rs 80 billion to Rs 90 billion is still pending to exporters of textile and allied industry is still pending and no schedule is issued in this regard.

There are signs of improvement in local textile sector. The increasing of 4.3 percent was witnessed in export of textile products. Though FBR has not up till now paid the sales tax refund amount of billions of rupees to the exporters. Moreover APTMA had requested the government to again start rated facility and also demanded to lift import duty on cotton.

Pakistan Cotton Ginners Association has issued the statistics of cotton production in the country till October 15 according to which during that period 68 lac 17 thousand bales were produced which is 18 lac 24 thousand bales almost 20.92 percent as compared to the last year production of 86 lac 71 thousand bales during this period.

According to the experts it is expected that this year 85 lac bales will be produced in the country. Moreover chairman Pakistan Cotton Ginners Association Javed Sohail Rehmani told that his delegation hold meetings with the chairman FBR Shabbar Zaidi and PTI central leader Jahangir Khan Tareen and concerned officials regarding abolishing 5 percent to 8 percent sales tax on Banola khal and they assured him that it will be abolished soon.