Though the local lint prices have not gone down like the tumble seen on the New York cotton futures market this week, sentiment in the domestic market remains weak. Though the better grades of cotton are still being offered at higher rates. A declining tendency in cotton prices for the general types of lint by about Rs 50 per maund (37.32 kgs) is discernable.
Besides sizeable falls recorded recently in the New York cotton futures prices, mills in Pakistan have become very disheartened with prevalent global recession which has now become patently manifest. Thus the troubles of domestic mills are likely to accentuate now that business prospects are sliding down in most parts of the world. Pakistani cotton prices have not yet gone down very much because supply of cotton from the domestic source still remains short compared to the consumption by the mills.
If the mills remain reluctant buyers of cotton, cotton prices should remain subdued. In conjunction with global fears of deepening recession, lack of domestic power, gas supply and high cost production being faced by Pakistani mills can cause several more units to curtail or close their operations during the forthcoming months. Such a situation could cause reduction of cotton consumption which till quite recently was being estimated to be between 15 to 16 million domestic size bales.
Once again the leaders of the textile industry lead by their acting chairman M.S.Tariq Saud met caretaker Prime Minister Mohammadmian Soomro recently in Islamabad to apprise him of their continuing difficulties. Prime Minister Soomro told the textile millowners that they hold a prime position in the country's economy and that all the stakeholders should get together to promote increase in cotton production along with improvement in its quality, and that the government is committed to help the industry to raise its productivity and competitiveness.
In the mean time, government finally issued a notification last Wednesday allowing the import of half a million bales of shorter staple cotton via the land route into Pakistan. Other reports indicated that infrastructures including checking and implementation of fumigation at the Wagah border with Indian near Lahore is being speeded up to facilitate fast arrivals of cotton from India by the land route.
Recent reports reaching from Germany indicate that Pakistani mills have done good business in the Heimtextil fair and obtained export orders for nearly 500 million US dollars. Also, sale and inquiry for towels is reported to be doing well. However, these positive developments will not be sufficient to pull out the overall textile industry from its persisting difficulties.
With its high cost of production, the Pakistani textile industry is not finding it easy to compete in the international market. Thus cotton buying by the mills will continue to remain cautious and selective.
A significant development which needs mention is the fortnightly seedcotton (kapas/phutti) arrivals report issued by the Pakistan Cotton Ginners Association (PCGA) which has shown a remarkable increase for the current season (2007-08) upto the 15th of January 2008 compared to earlier trade estimates. This factor pushes up the prospects of this year's cotton production in Pakistan by about one million domestic size bales from previous trade assessments.
Though the final outcome of the current year's cotton crop of Pakistan will not be known for another few weeks, but the PCGA report declaring arrivals till the middle of this month should bring a notable measure of relief to the domestic textile industry.
Total seedcotton arrivals for the current season upto the middle of this month have been shown at 9,974,715 lint equivalent bales against last year's (2006-07) figures of 11,555,690 bales. Out of these arrivals, the domestic mills have lifted 8,071,854 bales while the exporters have picked up 81,800 bales. That leaves an unsold stock of 1,821,061 bales lying with the ginners in both pressed and loose form.
Sales reports till Thursday evening were scarce as buying by the mills seemed to have declined. The general price idea of seedcotton (kapas/phutti) in both Sindh and Punjab reportedly ranged from Rs 1500 to Rs 1600 per 40 kgs according to the quality.
Lint prices in Sindh were being offered from Rs 3150 to Rs 3300 per maund (37.32 kgs), while in the Punjab they were said to have been quoted from Rs 3,150 to Rs 3,400 per maund as per the quality. Though the price sentiment was downward inclined, some ginners still stuck to the price of Rs 3400 per maund for their superior lots of cotton. A sale of 9,000 bales from such stations as Daharki, Ghotki and Mirpur Mathelo in upper Sindh (K-68) was reported at Rs 3300 per maund. Market was quiet to easy later in the evening.