Official spot rate down Rs300 amid slow activity

KARACHI: The Spot Rate Committee of the Karachi Association on Friday has decreased the spot rate by Rs 300 per maund and closed it at Rs 11,900 per maund. Market sources told that under the influence of international market local market remained bearish on Thursday. Market sources told that trading volume remained low because of fluctuation in the price of dollar as compared to international market where dollar is strengthening.

Sources told that reason behind bearish trend worldwide is increasing tension between China and America on economic front. ICE cotton futures tumbled over 4.5% to trade limit down on Thursday, pressured by a weak export sales data and a stronger dollar. The most active cotton contract on ICE Futures US, the front-month May contract fell 4.00 cents, or 4.9%, to 78.44 cents per lb at 12:23 p.m. EDT (1623 GMT), its lowest since Jan. 4. The July contract slumped 4.8% to 79.52 cents.

Intercontinental Exchange Inc has set the Daily Price Limit for all Cotton No. 2 futures delivery months at 4 cents per pound above and below the prior day settlement price.

“After the report, it (cotton) really started selling off pretty aggressively. New sales were definitely a bit lower and we saw cancellations from China,” said Bailey Thomen, cotton risk management associate with StoneX Group.

The US Department of Agriculture’s weekly export sales report showed that net sales of 271,200 running bales (RB) for 2020/2021 were down 38% from the previous week, with a 1,800-RB reduction from China.

The report also showed that exports of 313,500 RB were down 11%. “So, it is a combination of a pullback in demand and also these broader economic and political factors as well,” Thomen said, pointing to concerns regarding US-China relations. The United States is the biggest exporter of cotton, while China is the largest consumer. The dollar index rose to a more than four-month high against key rivals, making cotton costlier for investors holding other currencies. Total futures market volume rose by 30,895 to 61,439 lots. Data showed total open interest gained 2,428 to 232,040 contracts in the previous session.

Cotton Analyst Naseem Usman told that exporters have halted yarn sales as the depreciating dollar slashed their profit margins, resulting in higher availability of the raw material at cheaper rates in the domestic market, sources from the value-added textile sector said on Tuesday.

Meanwhile, industry sources were also hopeful that the recent initiative by Pakistan for normalisation of relations with India could pave the way for cheaper cotton yarn imports from across the border.

The value-added textile sector has been demanding the government to allow import of yarn from India since prices are cheaper while the locally produced yarn is costlier. Spinners who produce yarn were of the view that the raw material was costlier due to costly cotton imports.

With the falling greenback rates, imported cotton would also be much cheaper for the industry in Pakistan. Pakistan is importing cotton from many countries including the United States which increased the cost of production. Cotton production in the country fell by 34.4 per cent against the target while consumption continues to increase.

“The recent decline in yarn prices is neither significant nor there is any surety that prices would remain stable as it is mainly because of a sudden drop in US dollar prices,” said Aamir Aziz, an exporter of finished textile products.

Naseem told that 400 bales of Dherki were sold at Rs 11800 per maund, 1600 bales of Khan Pur were sold at Rs 11950 to Rs 12000 per maund and 400 bales of Rahim Yar Khan were sold at Rs 11600 per maund.

Naseem also told that rate of cotton in Sindh was in between Rs 10,300 to Rs 11500 per maund. The rate of Phutti in Sindh is in between Rs 4500 to Rs 5100 per 40 kg.

The rate of cotton in Punjab is at Rs 12500 per maund. The rate of Phutti in Punjab is in between RS 4800 to Rs 6300 per 40 kg. The rate of Banola in Sindh was in between Rs 1600 to Rs 2000 while the price of Banola in Punjab was in between Rs 1800 to Rs 2250. The rate of cotton in Balochistan is Rs 12000 per maund. The rate of Phutti of Dalbadin Balochistan is available at Rs 6300 to Rs 6400 per 40 Kg.

The Spot Rate Committee of the Karachi Association has decreased the spot rate by Rs 300 per maund and closed it at Rs 11,900 per maund. The Polyester Fiber was available at Rs 220 per Kg.

Copyright Business Recorder, 2021