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After the free fall of New York cotton futures prices soon after attaining majestic level of US Cents 157.23 per pound on 10th November 2010 domestic lint prices also continued to swing downwards over the past fortnight or so. However, pursuant to the firmness and gains in the New York futures prices over the last couple of days, local lint prices also firmed up at midweek.
Market sources say that in addition to positive fundamentals in the domestic cotton condition as we face a net deficit this season, growers withholding seedcotton (Kapas/Phutti) and the ginners selling sparingly have also contributed to the gains in local cotton prices. Though cotton prices were on a week footing just a day or two earlier, they have risen by about Rs 400 to Rs 500 per maund (37.32 Kgs) presently.
Just like the past few months, when the New York cotton futures prices (ICE) remained determined to follow their single-tracked upward journey to unprecedented heights, domestic prices in Pakistan also followed in tandem. However, if the New York futures and also physical cotton prices consolidate their gains and establish a stable range of working prices, Pakistan lint prices may also stabilise mostly at the prevailing levels.
The domestic cotton output during the current season (August 2010-July 2011) is now reckoned to range between 11 million to 11.75 million domestic size bales on an ex-gin basis. The domestic mills are expected to consume between 14.5 million to 15 million bales this season necessitating an import of two to three million bales (170 Kgs). With government indecision and uncertainty still operating in India concerning opening up and resuming cotton exports, Pakistan mills may willy nilly have to import their lint requirements from Brazil, USA, West Africa or the CIS, wherever and whenever feasible.
It is roughly estimated that from the above noted cotton import requirements, Pakistan has already booked one million bales to 1.5 million bales (170 Kgs) of sundry styles from different origins, including India, before exports were banned from the latter source.
During the current season (August 2010-July 2011), some commercial quantities of cotton started arriving as early February/March 2010. Next season viz 2010-2011 when the growers are very well-heeled and anxious planters of cotton, new crop (2010-2011) arrivals in relatively larger quantities could start arriving early.
Seedcotton (Kapas/Phutti) prices on Thursday were about Rs 100 to Rs 200 per 40 Kgs higher compared to a day earlier. In Sindh, they reportedly ranged from Rs 3,600 to Rs 3,800 per 40 Kgs, while in the Punjab they were said to have ranged from Rs 3,600 to Rs 3,900 per 40 kilogrammes in a steady to firm market.
Lint prices gained about Rs 400 to Rs 500 per maund (37.32 Kgs) on Thursday. In Sindh, lint prices reportedly ranged from Rs 8,400 to Rs 9,000 per maund (37.32 Kgs), while in the Punjab they are said to have prevailed between Rs 8,300 to Rs 8,800 per maund, according to the quality. Little business was reported till the evening as the growers were sitting tight with their produce where as the ginners were commensurately asking for higher prices. Sales were reported later at night.
Yarn prices were reportedly weak but the expectation was that because China is still enquiring for yarn, yarn prices cannot be too bearish. Traders also conveyed that in the overall assessment, lint prices cannot go down too much.
Earlier in the week, it was reported that yarn and textile exports registered a record performance last month. The knitwear sector exports were said to have increased by 39 percent while the exports of cotton yarns, bed wear and readymade garments recorded an average growth of 33 percent each. Overall exports from Pakistan have shown handsome growth and are thus expected to achieve the target of US Dollars twenty billion during the ongoing fiscal year (July 2010-June 2011).
In the evening lint prices moved up substantially so that Sindh styles sold from Rs 8,400 to Rs 9,000 per maund (37.32 Kgs), the latter prices being for lint form Upper Sindh (K-68). In the Punjab, cotton prices ranged from Rs 8,300 to Rs 8,800 per maund, according to the quality.
In actual sales which were reported on Thursday, 400 bales of cotton from Tando Adam in Sindh sold at Rs 8,300 per maund (37.32 Kgs), 400 bales from Nawabshah sold at Rs 8,500 per maund, 500 bales from Khairpur district sold at Rs,8,700 per maund, while 800 bales from Upper Sindh (K-68) sold at Rs 9,000 per maund showing a significant upward leap of cotton prices. In the Punjab, 400 bales from Bahawalnagar were said to have been sold at Rs 8,500 per maund in a very tight market.
On the global economic and financial front, despite the decrease of jobless claims in America and better spending by the consumers, the overall situation remained negative. In the forefront, the financial woes of Ireland have unsettled the entire banking and fiscal system of Europe with pointers that Portugal and Spain are poised to go down the same slippery path. Therefore from Iceland and Ireland to Greece, Portugal, Spain and other countries in the southern periphery of Europe, sovereign debts accompanied by gross mismanagement, speculation and malfeasance have shaken up the Euro, the so-called single currency. Only Germany seems to be floating high.
However, Chancellor Angela Merkel has opinionated that the private sector also has the duty to chip in and help stabilise a highly wayward financial situation in several Eurozone countries. Merkel's proposal has brought lot of criticism.
Thus the fiscal fortunes of Europe continue to wobble interminably leaving little apparent hope for even a modicum of social and economic stability in Europe. Now fears have arisen that economic crises presently prevailing in Europe and indeed around the world are threatening to unravel and undo the very foundations of human civilisation itself.
In a recent lecture, Dr Jean-Francois Daguzan, senior research fellow at the Foundation for Strategic Research, France, told an audience in Islamabad that the recent economic and financial developments including currency wars have the portents to destabilise the entire world and that the balance of power has already shifted from existing countries to new countries.
He had serious doubts that the United States could continue to bear the burden to bring economic, financial and social stability to the disoriented world. He is also reported to have said that though India a big economy, but it remains incapable to comprehend the global changes. He felt that China and not the United States could assist in stabilising Europe.

Copyright Business Recorder, 2010

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