Cotton sales dipped as consumers eagerly looked for residual premium lots and stocks to be released by the TCP, during the week ended on April 16, 2005. While the spot rate dipped in early day, stayed down Rs 25 to Rs 2225 without upcountry expenses. The spot rate on Friday was down Rs 25 to Rs 220.
WORLD SCENARIO: Cotton trading in NY was dominated by switch trade punctuated by trade sales etc during the week when minor fluctuations were marked in futures as trade waited production and export sales reports. The May opened 0.06 up to 53.27 and July up 0.01 to 54.47 cents a pound.
The opening day saw futures marginally higher as the trade pondered what kind of conditions cotton farmers were facing current spring wile it looked forward to a USDA monthly production report.
Traders said the market will just drift along until the delivery period is over. The next day's session settled lower dominated again by switch trade. Traders expected spreads will continue to prevail upon the trade with little change in flat price. Analysts saw pace of business was modest, but since most of the running was in switch trade. They said soon the July will become the lead month with more open interest.
On Wednesday futures turned sharply lower. Traders said talk of Pakistan selling several hundred thousand bales of cotton and the inability of May contract to sustain itself above 52 cents prompted the market to react early. Brokers said they saw support in May at 50.80 and 50.20 and resistance at 51.70 and 52.50 cents a pound.
The Thursday's session saw futures May surged 0.92 to 52.14 July was up 0.52 to 53.34 cents a pound. The rise was attributed to narrowing of difference between the May and July indicates that a major trade house was poised to take delivery of cotton around April 25. Meanwhile, scenario presented positive outlook aided by USDA cotton sales, hit 265000 RBs and shipments hit 339,400 RBs against expectations of 3 to 400,000 RBs.
That made it clear that both sales and shipments were strong and supportive to futures. The week end showed mixed trend in futures as players were trying to get the May contract out of the way before it goes into its delivery period on April 25. The most players were also trying to keep the May, close to 52 cents going into options expiration. However, May was down 0.08 cent to 52.06 and July shed 0.20 to 53.14 cents a pound of the close.
LOCAL SCENARIO: The buyers and sellers both waited the ECC decision to ask TCP to release stocks. The spinners who were in quest of quality particularly delayed buying The trading therefore stayed sluggish and very few bales were lifted.
However, the spot rate dropped Rs 25 to Rs 2225 and rates in ready ruled around Rs 2050 and Rs 2300 and seedcotton ruled of Rs 900 and Rs 1075 per 40 kg. On the first day interest rate hike pushed spinners to visit cotton market to do some shopping. But a wait was preferred.
The spinners wanted the cotton prices to come down on quality lots should be offered. However, no one was budging an inch. The second days goings were as dull with a solitary deal struck.
The spot rate came down by Rs 25 to Rs 225. The asking cotton prices ruled around Rs 2050 and Rs 2250 slightly, lower. Brokers opined that India Pak one dayer also claimed the casualty.
On Wednesday spinners waiting hopefully that authorities would advice TCP to go for selling, once again were once again disappointed. Instead, cabinet decided to raise phutti prices by Rs 25 to Rs 976 for the coming season. Spinners moving around the market for some quality lots were disappointed despite rate remained low of Rs 2050 and Rs 2250.
On Thursday the cotton consumers stayed away refusing to buy low quality cotton at cheaper price. The brokers thought spinners are anxiously but hopefully expecting release of TCP stocks which are far better in quality than the pending stocks with the ginners. Spot rate maintain previous level.
However, experts also hoped that PCGA arrival report may prove to be pace-maker. They hoped reluctance on the part of buyers may be due to importers sensitiveness about standard products.
Spot rate remained on unbudged at Rs 2225. On Friday taking situation depressed spot rate was slashed by Rs 25 to Rs 2200. However, TCP is still making preparations to call tender. The idea is delay, for outlet of the ginners stock with them. Only deal was truck while ready prices ranged between Rs 2050 and Rs 2250. The PCGA latest data was also awaited.
MODERNISE TEXTILE SECTOR: Are in anyway outmoded second-hand textile machinery, imported dyes and chemicals responsible for disappointing performance in the textile products exports, knowledgeable circles expressed commenting on advice from Italian well-wishers to modernise the textile sector.
Small or comprehensive coverage has been given to textile exports of China, India and even Bangladesh and Sri Lanka, but biggest foreign exchange contribution of textile sector of Pakistan.
The circles said they were pretty bothered at the subdued tone of textile exporters ever since January 1, 2005, the WTO was rushing in and finally came the day after January 1, 2005, the borrowed money that was invested was trumpeted too much. But today as far as other relevant people beyond country were concerned the huge investment was still too humble.
The Italian Consul General Bruno expressed on the eve of Atatex reminded, like dozens of others in the past, that Pakistan could only be competitive by using latest technology and lowering cost of production.
The world had been very sympathetic to yarn exporters from Pakistan advising them to improve technology and textile value added products. They would tell exporters to cease exports of cotton and yarn which infact are raw and semi raw materials for those who compete Pak products.
Let such country import cotton and yarn who don't have cotton produced in their countries. Yarn and grey cloth would yield merely few cents while value-added products earned 8 to 10 dollars for the same weight of cotton and yarn.
However, Italian trade commissioner while inviting Pak textile people to learn more of the art of the trade, boasted that machinery from Italy were appreciated and patronised in Pakistan.
He reminded in 2004 Italy exported machinery worth 74 million euros. Later he referred Pakistan as the leading market for Italy. He said most requested machine by Pak were spinning 33 percent, knitwear 24 percent and weaving equal to knitwears.
They warned and rightly so when they said that complete elimination of import quota could affect Pak exports. They hoped Pak exporters would assess and analyse the time period would take to rectify the shortcomings!
UNIT CLOSED: The Pak Hosiery Manufacturers Association (North) Chairman Adil Butt and leading knitwear exporter M Khurram told a press conference that 50 percent knitwear units had already been shit down. The reason for this was stated to be adverse situation resulting in loss of 250,000 jobs. The rest of the units are on the way to closure.
This was despite the fact that knitwear exporters from Bangladesh, Sri Lanka, and India had been doing well. They told the conference that their competitors in above countries were receiving "hidden subsidies" from their governments.
Besides this, they pointed out that their competitor's enjoyed duty free access to EU countries. It is not so far clear whether PM's and President's efforts for free access to EU and US markets brought forth any fruition, sources reminded that media carry exporters plea to facilitate to make them competitive. Media also covers, they said what government is doing to make Pak exports as much viable as possible.
Even then India, China and much smaller countries with less resources are booming since quota free regime set in. What does excel other countries in the face of our exporters? The government is abolishing or reducing ST, Custom duty etc but exporters fail to make their products cost effective. There appears to be some basic factors affecting these efforts, to fight back our die-hard competitors.
It also appears quite above board, that according to sources, both government and exporters are trying to hide basic factors. It is high time that factors leading our efforts to maximise our exports down the drain. Are imports of various essentials for textile industry holding our exports hostage despite quality cotton and weight government puts behind the exporters? Who else then the government and exporters can lay fingers on those factors claiming our edge?
CHINA, US, EU ROW: The American manufacturers/ importers have already made a point to take advantage of Chinese 2001 accord, any wrong to cause market disruption be corrected. Similar heart-burning was also being felt in EU to cap Chinese exports before major disruption is caused. The EC however has so far restricted to the rising tide of protests to create road block for exports from China.
The European Commission had been registering protest calls from Euratex industry but had been looking for justifiable data. The Chinese authorities and exporters had at the very first outset noted the clamour and had held out assurance to submit to measures against exports if they really disrupted markets in importer countries in these cases US and European Union. And hence the delay- EC spokeswoman told a news briefing that EC is not in a hurry, but would take what she said safeguard measures in over a week's time.
This decision shows, while industries appear in a haste, the authorities have been judging their action to be justified. The EC has in view the flagrant violation of the accord it China had hurt to WTO, but had also in view WTO spirit was not violated.
However, knowledgeable circles were hoping to see how far steps taken by EC were justifiable and in keeping with WTO rules and system. China is bound under 2001 accord that WTO members could step in to cap imports at Chinese clothing and textiles at 7.5 percent above the level of shipments of the previous year until 2008, subject to conditions that exports demonstrated the importer-manufacturers had suffered.
The exporters from China had noted the clamour in US and EU as early as within days after January 2005, and had held out assurance that they will mend the wrong, if they had done, any. In view of the increased hue and cry in the biggest-export markets - the US and EU and in view of its honoured assurances it was expected that China will hold on to the promise and will deter any action (unprecedented) in connection with wrong done to WTO system/rules. It was expected China and India would make inroads. But soon after the start check and balances question will arise was not expected. How China, US and EU (EC) set pattern how in future similar problems will be tamed and calmed.
TAIL PIECE: A seminar organised by Export Promotion Bureau has seen Pakistan and India could emerge winners in the US apparel market in the post-quota period due to the safeguard threat looming over Chinese exports to America. However, speaker said to be an authority on global sourcing but has used "if." If Pakistan exporters strengthened their (Pak exporters) position in the US apparel market.
He has words of consolation for the Pak exporters as he ruled out concerns in Pakistan that high production cost was a hurdle. He advised Pak exporters to adapt to requirements of the US customs and buyers and other needs.
The chances are, if adhered to rules and likes specified, Pak products will be welcome, if China fails to keep its promise to restrict exports.