The cotton market surging to unlimited high seemed to have changed its course during the week under review. The trading in Pakistan was influenced accordingly. KCA preferred to keep spot rate at Rs 8750 after slashing it by Rs 200 but only for a day.
WORLD SCENARIO:
Cotton was down late last week as China, whose buying order sends prices surging, asked lenders to lock up more of their money with the Chinese central bank to pull excess cash out of the economy before inflation had a change to take off. This was second such move to deter inflation hitting cotton prices. Meanwhile Indian govt decision to have a grip on any cotton deal without bothering already concluded contract for over one million bales.
Only 0.4 million bales were received here. The stoppage sent a shock wave in Pakistan. Strangely enough when deal was being finalised Indian suppliers were quite sympathetic. They were aware that production in Pakistan had encountered worst floods. But hardly more or less 400,000 bales had landed in Pakistan when Indian govt officials backed out and refused to issue fresh ones. Pakistan has condemned holding back signed deal.
It is noteworthy that China has stopped imports telling on cotton prices. Besides dollar has also been losing shine, players were also keeping an eye on North Korean heavy artillery fire on South Korean Island.
On Monday the US cotton futures ended lower, after falling by the daily six-cent limit for a second straight session, as weak overnight prices in No 1 consumer China fed through to the New York open and a firmer dollar added to the weaker tone. The benchmark March cotton contract on ICE Futures US ended down 5.36 cents, or 4.4 percent, at $1.1779 per lb but above an earlier six-cent downside limit move to $1.1715 per lb. The March cotton contract is down nearly 23 percent from its all-time peak at $1.5195 per lb on November 10.
On Tuesday the US cotton futures fell by their daily six-cent limit for the third straight session, notching their biggest three-day decline in more than 15 years, as Korean tensions and euro zone debt concerns accelerated the market's recent correction from record peaks. Cotton has been hit hard in recent weeks by mounting fears that China may take aggressive action to curb inflation running at a 25-month high, raising interest rates or capping domestic prices with measures that could crimp commodity demand or drain liquidity from bubbling domestic markets. The benchmark March cotton contract on ICE Futures US ended down the six-cent limit, or 5.1 percent, at $1.1179 per lb.
On Wednesday the US cotton futures bounced to a firmer finish, as technically oversold conditions and prospects of greater Asian demand growth helped prices snap a two-week losing streak that shaved more than 26 percent from the market. The benchmark March cotton contract on ICE Futures US climbed 4.80 cents, or 4.3 percent, to settle at $1.1659 per lb, near the upper end of its $1.1113 to $1.1771 session range. The bounce made cotton the biggest gainer in the CRB Index on Wednesday. Volumes were relatively firm ahead of the US Thanksgiving Day holiday on Thursday. The total stood at 27,038 lots by 3:28 pm EST (2028 GMT), up more than 50 percent from year-ago levels, Thomson Reuters preliminary data showed.
On Friday the US cotton futures finished down four percent, falling by their daily limit intraday and bouncing like a yo-yo in sideways dealings after dropping more than 25 percent from a record high hit two weeks ago. The benchmark contract closed the week down 9.2 percent, the biggest weekly loss for the second-position contract since February 2009. March cotton futures made the biggest losses for the day on the 19-commodity Reuters-Jefferies CRB index, just one session after being the biggest gainers. They were the biggest losers on the index the day before that. Volume was thin, however, in a slightly abbreviated session following the US Thanksgiving holiday on Thursday. The benchmark March cotton contract on ICE Futures US closed down 4.83 cents, or 4.1 percent, at $1.1176 per lb, slightly paring losses after falling by the daily limit of five cents to a session low at $1.1159.
LOCAL TRADING:
The violence and Eid holidays over trading activity started with gusto as 18000 bales of cotton was marked changing hand in price range of Rs 8700 and Rs 9000 spot rate was unchanged at Rs 8500. Seed cotton prices in Sindh and Punjab were down by Rs 200 and Rs 100 to Rs 3700 and Rs 3900. Price trend in international markets falling with bigger margin and hence sellers are generally holding back stocks. The buyers are laying hands on every lot they can manage to lift.
On Tuesday sellers appreciated the world moves and put on offer larger quantity hence consumers bought more or less 24000 bales of cotton in price range of Rs 8200 and Rs 9000 same as on Monday. Will the sellers outwit, they themselves know not. But cause consumers worry by holding stocks back. The sellers and buyers should have vision to act in a way to better dwindling economy.
On Wednesday in line with world price trend hectic buying actually was marked on the cotton market where the consumers did record buying at nearly 38,000 bales. Welcoming the favourable rates between Rs 7700 and Rs 8700. Eyeing any change in their favour ginners brought spot rate down at Rs 8300 seed cotton price did not follow suit and resisted fall to stay back at Rs 3500 and Rs 3700 both in Sindh and Punjab. The reluctant sellers offered lint for sale, not seem lately. The market sources however, noted that regular phutti arrival pushed sellers to relax position and offer stocks.
On Thursday spot rate was held at previous day's level Rs 8300. Sales were down noted at nearly 12,000 bales of cotton. Market sources were reluctant to say whether buyers were not inclined to cover higher quantity or sellers were expecting to receive favourable price trend from world trading centres.
On Friday upward trend prevailed as fine quality is disappearing from the market due to short crop. The Karachi Cotton Association (KCA) raised the spot rate by Rs 200 to Rs 8,500. Seed cotton prices in Sindh and Punjab maintained bullish trend gaining Rs 100-200 to Rs 3,700-4,000, they said. In ready business trading activity showed drastic improvement as about 41,000 bales changed hands at Rs 8,300-9000.
On Saturday prices fell modestly as mills kept on the sidelines in expectations of further decline in the rates. The Karachi Cotton Association (KCA) left the spot rate unchanged at Rs 8,500, as a result, seeds cotton prices in Sindh and Punjab slid with modest fall by Rs 200-100 to Rs 3,500-3,900. In ready business activity was down as about 11,000 bales changed hands at Rs 8,100-9000. The mills, who were busy in forward buying during the last sessions, now kept on the sidelines on expectations of more decline in the rates, analysts said.
GARMENT EXPORTERS SEEK INCENTIVES:
Garment exporters are earning more per unit than other made ups and much more than cotton and cotton yarn exporters. If condition permit garment exporters should be extended incentives. This incentive package garment exporters have sought from Commerce Minister Makhdoom Amin Fahim. They are in such desperate and sad situation that they see no other way but to collapse. The authorities should not take such a demand from chairman PRGMEA easy as this sector in his world is going through the darkest period of its experience.
He has listed many factors that have practically trampled its very survival. As a matter of fact all textile sectors and viewing more practically entire export sectors are almost sinking for want of cheap inputs and gas, energy, LPG, load shedding together hampering production and failing to honour orders in hand.
The chairman is mindful that the financial resources of the Pakistan government has depleted and hence he suggested to make just simple short term immediate policies to facilitate the ready made garment industry without financial assistance. How the authorities will heed the suggestion is to be seen. But the prayers have come from needy people who add to kitty substantially provided they are made to be able to.
TEX WAGERS STAGE DEMO:
Should textile wagers resorting to show of anger work as eye opener for the authorities who care not their election manifesto.
The wage earners only a tat different from unemployed. In present case the wage earners had somehow celebrated their religious festival unusually a but lengthy planning in their own. How they will approach work providers when three-day holidays will end, simultaneously opening opportunity for work ensuring two breads. But they learnt in Pak-Manchester, that three-day gas load shedding would make nearly impossible to get work. How they reacted was covered by newspapers in three column headlines.
Authorities should take event seriously. The protest, demonstration and strike this hand to month country cannot afford at all. Slogans hurled into air during peak election days should prove meaningful. Thus report datelined Faisalabad said: the unemployed textile workers staged a protest rally against week long closure of their place of opportunity and strongly demanded that the government should immediately solve the problems of the value added textile industry.
Even stronger call was recorded that government should not kick their hungry selves and should take steps in favour of masses and not in favour of monopolistic groups. Speaker on the occasion asked authorities to review its anti-labour policies and facilities be provided under human rights. They said due to anti-industrial policy, the textile chain is breaking and as a result allied ancillary industry had also stopped their function. They suggested how situation could be given a better turn.
BANE OF GAS SUSPENSION:
It sounds somewhat threatening to the already sunken economy that more than 175 factories ceased functioning due to suspension of natural gas for three days rendering 20,000 workers jobless in South Punjab. The textile processing, printing, dyeing, sizing, readymade garments and textile chemicals manufacturing units, in short textile chain entirely stayed inoperative.
The labour intensive power looms industry was not safe and was severe hit by gas load shedding, which has not been getting supply of sized yarn due to non-availability of gas. As a result more than 50,000 power loom owners had permanently closed their business. Salman Ali, chairman of Pak Hosiery Manufacturers and Exporters Association north zone said that seven days gas load shedding has virtually crippled the value-added textile industry and escalated the prices of essential yarn in the market by speculators and hoarders. The sufferers pinpointed stet-back as a result of above problem besides slow down in exports besides newly established modern and sophisticated machinery, which leaders said is now being turned into scrap.
Harassed value-added exporters lamenting the poor law and order situation expressed our foreign buyers were shifting their focus elsewhere such as China, India, Bangladesh and were placing their export orders to the exporters of these countries.
UNLAWFUL BLOCKING OF COTTON EXPORT ORDERS:
Indian cotton exporters to Pakistan were naturally helpful keeping in view neighbourliness. They were aware when Pakistan was in need of cotton first choice used to be India. No doubt seeking India cotton was linked to short-duration required to reach this side of the border, besides freight also involved was much less than in case of the US or Commonwealth of Independent States.
This year also India was approached and accord for over one million bales of cotton was finalised. Hardly some 400.000 bales had probably reached when China entered cotton markets naturally giving boost to prices. Indian government asked exporters to hold on supplies until they were issued fresh licences.
The ground probably was given for the restrain rain had caused delay in harvest. It is now relevant question whether Pakistan got supplies against all the licences officially issued. But the criticism by President of International Textile Manufacturers Association has exposed Indian position who called blocking supplies as an unlawful act. The chief in a letter addressed to Indian textile minister expressed displeasure over unlawful suspension of cotton supplies to this country, being a next door neighbour and hit by devastating flood marauding bulk of standing crop. The letter will have positive impact on Indian minister is longingly awaited here.