Activity in the lint market has mostly been lying in a limbo since the past couple of weeks. low morale in the textile industry, ample domestic and imported supply of cotton available with many of the spinners to carry over their operations into the next season (2007-08).
Impending federal budget due for announcement this coming Saturday (June 09, 2007) could be the reasons for a pause in sales of an estimated unsold stock of nearly 200,000 bales from the current crop (2006-07) still lying with the ginners.
The All Pakistan Textile Mills Association (Aptma), together with their splinter group which has organised itself as the All Pakistan Textile Association (Apta) have campaigned vigorously trying to convince the government to give them necessary aid and attention to put them on a level playing field to face their competitors equitably in the global export markets.
At first it seemed that the government believed that it had done enough for the textile industry so that it should be able to compete in the international textile markets. However, with further convincing on the part of the spinners and the millowners, it seems that the government is willing to give more facilities to the domestic textile industry in the forthcoming federal budget of even later in the month when the trade policy for the forthcoming year (2007-08) is announced.
Business Recorder reported from Islamabad on Thursday that the government will be meeting a major demand of the textile industry and had decided in principle to withdraw the presumptive tax regime (PTR) and also reduce the income tax from the current 1.25 percent to 0.5 percent under the normal income tax law. This change is expected to be made in the federal budget due for announcement this coming Saturday.
In another report in the Business Recorder also published on Thursday, it was said that Prime Minister Shaukat Aziz had finalised a Rs 40 billion textile package in consultation with the stakeholders and the concerned ministries. If these changes in income tax rate and collection mechanism are made and the main demands of the textile industry are also met as reported, the industry would benefit remarkably.
It is thus hoped that with more attention and assistance which may be forthcoming in the next fiscal year (July 2007 - June 2008), the Pakistan textile industry may find itself in a better position to face its competitors on the global market. Thus it is hoped that conditions in the domestic textile industry may start improving over the next few month's time.
To recapitulate events of the outgoing season (2006-07) and make projections for the incoming season (2007-08), it may be said that in the current year (2006-07) the lint output on the ex-gin basis would be about 12.4 million bales (170 kgs). Mills consumption in Pakistan during the outgoing season can be estimated to be between 15 to 15.5 million domestic size bales, where as in the forthcoming season it can go up to 16 million bales or more.
In this context, the next season's (2007-08) lint output in Pakistan on an ex-gin basis is expected to range from 14 to 14.5 million bales. This season (2006-07), cotton imports into Pakistan would be around 2.5 million bales (170 kgs), and the next season (2007-08) mills in Pakistan would still need to import more than two million bales (170 kgs).
Sales of new crop (2007-08) started a couple of months ago for deliveries end of July and August 2007 and about 4000 bales business was transacted. This week, some reports of appearance of mealy bug in southern Sindh and traces of pest problem in Sadiqabad in Punjab instigated the ginners to suspend new crop sales for the time being. These developments have put the market in a lethargic condition and thus a quietness pervades over the cotton market.
With better information about the development of the new cotton crop condition which may be available over the next few weeks and also when the trade and industry will have seen the provisions and prescriptions of the new federal budget, lint prices may show a clearer direction.
For the current crop, lint prices remain on the weak side, but ginners are not readily willing to sell more of new crop because they want a clearer picture regarding the extent of any infection of the reported cotton plants in lower Sindh. Therefore, there is a lack of reported activity in the cotton market at present. Some reports still state that new crop output prospects in Pakistan remain good.
It may be noted that the Karachi Cotton Association (KCA) reduced its ex-gin prices of Grade 3 cotton twice recently. Last Saturday the KCA reduced the ex-gin price of Grade 3 cotton by Rs 25 per maund (37.32 kgs) and on last Monday by another Rs 25 per maund and fixed them at Rs 2625 and Rs 2600 per maund respectivly. The ex-gin price of Grade 3 cotton was determined at Rs 2600 per maund on Thursday. under these circumstances, hardly any reports of cotton business are being received at this juncture.
Generally speaking, cotton prices of current crop being quoted by the ginners in both Sindh and Punjab currently range from Rs 2400 to Rs 2650 per maund (37.32 kgs), but the general impression of cotton prices is that of dullness and absence of inquiry. One sale of 100 bales of Sindh cotton was reported by a mill in Nooriabad (near Karachi) at Rs 2625 per maund. Sale of 400 bales of cotton from Shujabad in Punjab was also reported at Rs 2625 per maund.
General increase of cotton futures prices in New York and also in physical cotton from most origins in recent past has resulted in the lack of any active interest on the part of the Pakistani spinners for the time being. Cotton prices in Pakistan can take a clearer direction when the federal budget is announced this weekend and also when more news of progress of the new crop (2007-08) is received and digested over the next few weeks.