Weekly Cotton Review: Cotton rate soars on bullish trend in international market

KARACHI: There has been a bullish trend in international cotton market. The spot rate increased by Rs900 per maund. Textile millers and ginners were cautious due to increase in the rate of cotton. As per details, the bullish trend remained continued in the local cotton market during the last week. Under the influence of increasing trend in the Rate of Promise (Waday Ka Bhao) of New York Cotton bullish trend remained continued in the local cotton market during the last week.

In the same way the rate of good quality of cotton reached at Rs14500 per maund which is highest in 11 years. The increasing trend remained continued in the rate of Phutti. Textile mills remained cautious due to increasing rates. The mills which were involved in buying despite high rates during the first three days of the week started cautious buying from Thursday due to which some ginners starting selling cotton keeping in mind the trend of market due to which the rate of cotton stopped from further increasing.

On the other hand it looks that New York Cotton market is the centre of increasing trend in the rate of cotton. The Rate of Promise (Waday Ka Bhao) of New York Cotton witnessed an increase due to increase in buying by China.

The rate of cotton in New York Cotton crossed one dollar per pound and reached at one dollar seven cent which is highest after the season of 2011. After that due to profit taking the market closed at one dollar four cent. In 2011-12 China was the biggest buyer at that time the Rate of Promise (Waday Ka Bhao) of New York Cotton reached at the highest level in the history.

At that time the rate of cotton reached at the highest level of Rs14500 per maund. Now after 11 years again the rate of cotton reached at Rs 14500 per maund. At that time many textile mills and ginners faced severe financial crunch and many textile mills and ginners were bankrupted but many fortunate ginners and textile mills earn a lot of profit.

At this time the rate of cotton in international market is more than local cotton market. Moreover the rate of dollar after increasing reached in between Rs 172 to Rs 173 due to which the import of cotton is expensive. On the other hand the container and shipment charges have increased many times and there is unprecedented delay in delivery due to which textile mills are facing financial crunch. The rate of cotton has increased and it is difficult to sell yarn on this price.

The rate of cotton in Sindh as per quality is in between Rs12800 to Rs14300 per maund. The rate of Phutti is in between Rs4800 to Rs6100 per 40 kg. The rate of Banola is in between Rs 1450 to Rs 1800 per maund.

The rate of cotton in Punjab is in between Rs 13800 to Rs 14500 per maund. The rate of Phutti is in between Rs 5500 to Rs 6400 per 40 Kg. The rate of Banola is in between Rs 1500 to Rs 1850 per maund.

The rate of cotton in Balochistan is in between Rs 13800 to Rs 14200 per maund. The rate of Phutti is in between Rs 5800 to Rs 6800 per 40 kg. The rate of Banola is in between Rs 1600 to Rs 1900 per maund.

The Spot Rate Committee of the Karachi Cotton Association increased the spot rate by Rs 900 per maund and closed it at Rs 14100 per maund.

Chairman Karachi Cotton Brokers Forum Naseem Usman told that bearish trend prevails in international cotton market. The Rate of Promise (Waday Ka Bhao) of New York Cotton in international cotton market reached at one dollar seven American cents which is highest after 2011-12 when the rate of cotton reached at the highest level of two dollars 26 American cents due to massive buying by China.

According to USDA weekly export report, more than five Lac seventy one thousand bales were exported which was 65 per cent more as compared to last week. This time too China was the biggest importer with more than four Lac eighteen thousand bales.

As per information, trade conflict between China and America has been settled after that China will import more cotton from America. Bullish trend remained continued in Brazil, Central Asian states, Argentina and China. In India it is expected that unprecedented rains may damage cotton crop in Gujarat due to which bullish trend prevails in Indian cotton market.

According to World Agricultural Supply and Demand Estimates this year cotton production in the world will be less than the demand due to which bullish trend will prevail in the market.

Moreover, cold war is going in between APTMA and Value added sector. Value added sector in its arguments saying that due to export of yarn they are not getting yarn on reasonable rates due to which they are saying that duty should be imposed on the export of yarn. APTMA is against, saying that there is no need of imposing duty on the export of cotton because cotton reserves in the country are stable.

The Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has stressed the need for continuing duty-free import of cotton and yarn from all over the world till the country becomes self-sufficient in the raw material. PRGMEA newly-elected regional chairman Sheikh Luqman Amin stated that Pakistan has been unable to achieve its full exports potential due to lack of product diversification and limited access to raw-material. All taxes and duties on cotton yarn import should be terminated on long-term basis to achieve price competitiveness and product diversification, he added.

He said the Economic Coordination Committee (ECC) of the Cabinet had announced to withdraw customs duty on import of cotton yarn in April this year for the period of three months in order to ensure smooth supply of it to the value-added apparel industry. The government's earlier move of withdrawing five percent regulatory duty in December 2020 on the import of cotton yarn, and then removal of customs duty in April 2021 greatly supported the apparel sector and contributed to the country's economic stability, which needs continuation, he added.

"As the relief has been withdrawn after June 2021 amidst shortage of cotton, export growth is expected to be affected severely, which should be avoided at any cost," he said.

PRGMEA Chief Coordinator Ijaz Khokhar has appealed to PM Adviser on Commerce and Investment Abdul Razak Dawood to put this demand of PRGMEA before the ECC once again for the continuation of taxes and duty-free import of cotton and cotton yarn from across the world as shortage of yarn still persists and the exporters are presently not booking foreign orders due to scarcity of raw material.

At a time when the exporters are facing financial crunch in the wake of 700 percent jump in sea freight charges and uncertainty in rupee-dollar exchange rate, the duty-free raw material would provide some cushion to the apparel sector, which is suffering a huge shortage of industry raw material, he observed.

The PRGMEA still thinks that the real solution of raw material shortage lies in opening of import through land route, as cotton yarn import via sea can never become the substitute of extremely low-cost yarn via land route particularly in the wake of exorbitant hike in freight rates of shipping lines, he added.

PRGMEA regional chairman asked the government that previous relaxation of customs duty on yarn import should not have been limited to just three months, rather it should have been continued until the country is capable of meeting textile value-added industry's demand of 10 million cotton bales.

He said the apparel industry has stopped to book orders, as the exporters are no more capable of entertaining the international market generally due to price factor and especially because of artificial shortage of cotton yarn created by the spinning industry which was holding stock in the hope of further hike in rates.

Sheikh Luqman Amin requested the prime minister to direct the ministries concerned to focus on the value-added apparel sector and prepare a solid strategy to help the industry stay afloat. He said the country has been unable to achieve its full exports potential due to lack of product diversification and limited access to raw-material. To this effect, he added, the all taxes and duties on cotton yarn import should be terminated on long-term basis so that exporters could be able to achieve price competitiveness and product diversification.

As the country receives huge exports orders, local production of cotton is not sufficient to meet the demand of the textile. Cotton was not available at competitive prices due to the customs duty and hectic procedures.

Copyright Business Recorder, 2021