Pressure continued on the domestic cotton market on Thursday as lint prices fell further. Due to Eidul Azha holidays extending from 12th to the 14th of September 2016 next week during which availability of transport to haul cotton from the field will be difficult and also expensive, business has slowed down and could remain dull for most part of next week. Business may start regularly after the middle of this month.
Within a week or so, seed cotton (Kapas/Phutti) prices have dropped by about Rs 200 to Rs 300 per 40 Kgs, while local lint prices have dripped upto Rs 800 per maund (37.32 Kgs) over the past one week or so.
Thus on Thursday seed cotton prices in Sindh are said to have ranged lower from Rs 3000 to Rs 3050 per 40 Kgs, according to the quality. In the Punjab, seed cotton prices reportedly ranged from Rs 2500 to Rs 2900 per 40 Kgs, depending on the quality. Lint prices from Sindh were said to have ranged from Rs 6000 to Rs 6100 per maund (37.32 Kgs), while in the Punjab they also reportedly ranged lower from Rs 6000 to Rs 6100 per maund in a very insipid market. Upto now seed cotton equivalent to nearly 1.6 million bales (155 Kgs) has arrived into the ginning factories. Domestic cotton crop output is being projected at 12 million bales during the ongoing season.
The All Pakistan Textile Mills Association (APTMA) has informed Prime Minister Nawaz Sharif that the domestic textile industry is in dire straits and one mill is closing down daily. APTMA has requested the prime minister to take suitable fiscal and financial measures to save the domestic textile industry from collapse. Due to shortfall in the domestic cotton crop, it needs to import nearly five million bales during the current season. Domestic yarn and textile prices are very weak.
While the global cotton prices have become relatively stable, domestic prices of both cotton and yarn are very bearish. Therefore, the domestic textile industry is facing very difficult and challenging times. Sales of cotton from lower Sindh were reported on Thursday being 2000 bales at prices ranging from Rs 5900 to Rs 6100 per maund (37.32 Kgs), according to the quality. Also, 1400 bales from the Khairpur district reportedly sold from Rs 6050 to Rs 6100 per maund. In the Punjab, 2000 bales of cotton were said to have been sold from Rs 6000 to Rs 6100 per maund, as per quality. The decrease in prices of domestic cotton is being described as a correction measure.
On the global economic and financial front, the prime news this week pertains to the gathering of Group of 20 leaders in Hangzhou, China to take stock of the world's economy. The message the G-20 leaders conveyed in no uncertain terms was that the world's economy continues to wobble and that the multifarious economic problems it is facing refuse to go away.
Chinese president Xi Jinping told the august gathering of the world's topmost leaders that most if not all the means and methods used to revive the global economy which faced the great Recession in 2008 have failed to rehabilitate the world's economy.
It was suggested by the global leaders gathered at Hangzhou that the sickness engulfing the world's economy is deep rooted and needed innovative structural reforms in the global economy, equalisation of economic benefits to a wider spectrum of the planet's populace and finding ways and means which go beyond simply reducing interest rates.
In the United Kingdom, factory output posted its biggest decline in a year following the Brexit vote when British voters decided to leave the European Union. Economic observers have said that the weaker condition in the UK industrial production and manufacturing remain a cause of serious concern.
In the Eurozone, it has been reported that business growth in August 2016 has been the slowest since the beginning of 2015. Moreover, it has been further observed that Germany, Europe's largest economy is also losing momentum. It has been noted further that the services industry growth in Germany has slowed more than expected and reportedly shown its weakest performance in more than three years. Reporting recently from London Reuters news agency said that the outlook for the services industry in the Eurozone is bleak being at its gloomiest since 2014.
Furthermore, the German industrial production was reported to have fallen sharply in July 2016 rather unexpectedly. The blame for the surprising production tumble has been ascribed to slow global demand and receding markets. Above all, the prediction that German economy may cool down has increased fears in the Eurozone. Thus the Eurozone economy is also poised to undergo a slowdown in the third quarter of 2016. Thus the economic growth in the Eurozone is anemic and forebodes ill for the Zone.
Trouble is also seen in Emerging Markets like Brazil and Turkey. Due to increasing political turmoil, risks and instability in these countries and geopolitical uncertainty in the Middle East and North Africa, the confidence of the investors has been sapped. Thus we see little possibility for any global economic turnaround for the foreseeable future due to the aforesaid problems.
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