KARACHI: Trading activity remained stable on the local cotton market on Thursday. Market sources told that mills were involved in cautious buying due to which the trading volume remained low.
Cotton Analyst Naseem Usman told that cotton stockpiling fell a massive 43 percent to 3.45 million bales till October 31, raising concerns that the country would have to import at least 7.0 million bales worth $3 billion to fulfil domestic demand, industry officials said on Tuesday.
Cotton arrivals declined 43.38 percent to 3.45 million bales against 6.09 million bales in the same month last year, as heavy monsoon along with sowing substandard seeds took a toll on total yields, said the last report released by Pakistan Cotton Ginners Association (PCGA).
Punjab and Sindh showed declines of 45 percent and 41 percent respectively in cotton production during the period under review. Both provinces had stocked 1.7 million bales each till the end of October. Last year, Punjab and Sindh stocked 3.16 million and 2.92 million bales, respectively.
Karachi Cotton Brokers Association Chairman Naseem Usman said that a decline of 2.6 million bales in cotton arrivals was a point of concern. He also told that despite the fact that cotton is an important cash crop, which contributes significantly to the national economy by providing raw material to the local textile industry, as well as cotton lint for export, policy makers failed to introduce quality seeds in the country.
Currently, 864,245 bales are in stocks with ginners, down 47 percent, compared to 1.62 million bales last year. ICE cotton futures edged lower on Wednesday on technical selling and harvest pressure, while market participants were kept waiting for the outcome of the US presidential election.
The cotton contract for December had fallen 0.25 cent, or 0.4%, to 69.99 cents per lb by 1:03 p.m. EST (1803 GMT), having earlier risen to a one-week high of 70.72 cents. The US presidential election hung in the balance after the race was closer than expected, with Democrat Joe Biden leading in two critical Midwestern states that could tip the contest in his favour.
"The speculators are still long and the market remains quite overbought so on rallies you have speculators coming out of their positions. May be they are coming out due to the uncertainty regarding the election as well," said Keith Brown, principal at cotton brokers Keith Brown and Co in Georgia.
On the other hand The All Pakistan Textile Mills Association (APTMA) and Pakistan Hosiery Manufacturers and Exporters Association (PHMA) have locked horns over the duty-free import of cotton yarn.
The PHMA has demanded the government abolish customs and regulatory duties on import of cotton yarn, claiming that the basic raw material was unavailable for apparel and home textile sectors in local markets which may lead to a decline in textile exports.
Former PHMA chairman Shahzad Azam said that the spinning sector was allowed to import cotton free of duty, but the apparel and home textile sector were not allowed the same, which, according to him, was a discriminatory practice. The former PHMA chairman alleged that spinning millers have formed a cartel and were blackmailing them by selling cotton yarn at higher rates.
"It is our right to import the material at duty-free prices just like spinning mills are allowed to import duty-free cotton," he added, reiterating that the government must concede to their demand if it wished to control a decline in exports.
Meanwhile, APTMA Punjab Chairman Abdul Rahim Nasir said that there was no shortage of cotton yarn in the country. "In fact, the import of cotton yarn during the first quarter of FY20 was 11,047 tonnes, while it rose to 13,976 tonnes in Q1FY21, showing an increase of 27pc," Nasir shared.
In addition, he maintained, yarn exports have also reduced significantly, signifying an enhanced supply to further processing and value addition in the country.
The APTMA official stated that the notion that Pakistani exports would miss Christmas orders due to a "shortage of yarn" was false as manufacturing and shipping procedures require at least 3 to 4 months, a timeframe which has long passed.
"The real issue is rooted in incorrect export pricing and misplaced expectations on the exchange rate," he said. It may be noted here that duty-free import of yarn for re-export after further processing has always been readily available to registered exporters through Duty and Tax Remission for Exports (DTRE).
Meanwhile, addressing the concerns of apparel manufacturers, the Ministry of Commerce held a meeting of stakeholders of spinners and apparel manufacturers to discuss the availability of yarns and their prices. In light of rising prices, MOC is considering reducing duties on various yarns and preparing a summary for the ECC.
"Apparel is the engine of growth in the textile sector and the availability of yarn at competitive prices is the pillar of strength. All sectors have to play their respective roles to maximize overall exports," said Dawood.
Prime Minister of Pakistan, Imran Khan, along with federal ministers unveiled another incentive package (reduction in the industrial power tariff) yesterday to spur economic growth, boost industrialization and increase exports of the country
As per the prime minister, with the current tariff structure, our power tariff was on average 25% expensive to our regional peers resulting in our cost of production to be comparatively higher thus making our exports uncompetitive. The package announced is to incentivize the local small, medium and large size industries to lower cost of production and make them competitive locally as well as internationally. It is also believed that the package will help businesses to grow and create numerous employment opportunities as well.
It is pertinent to note that the package is a proposal currently and is being sent to the industries and will be approved through cabinet in due course. Naseem told that 800 bales of Rohri were sold in between Rs 8950 to Rs 9100 per maund, 1400 bales of Khairpur were sold in between Rs 9000 to Rs 9300 per maund, 600 bales of Sarhad, 600 bales of Mirpur Mathelo, 400 bales of Ghotki were sold at Rs 9700 per maund, 800 bales of Sadiaqabad, 800 bales of Mianwali were sold at Rs 9800 per maund, 800 bales of Bahawalnagar were sold in between Rs 9800 to Rs 9900 per maund, 400 bales of Dharanwala, 800 bales of Rahim Yar Khan, 800 bales of Chishtian, 1000 bales of Fort Abbas were sold at Rs 9900 per maund and 1200 bales of Haroonabad were sold in between Rs 9850 to Rs 9900 per maund.
He told that rate of cotton in Sindh was in between Rs 8500 to Rs 10,000 per maund. The rate of cotton in Punjab is in between Rs 9800 to Rs 10,200. He also told that Phutti of Sindh was sold in between Rs 3200 to Rs 4600 per 40 kg. The rate of Phutti in Punjab is in between Rs 3500 to Rs 5000 per 40 Kg.
The rate of Banola in Sindh was in between Rs 1650 to Rs 1900 while the price of Banola in Punjab was in between Rs 1800 to Rs 2000. The rate of cotton in Balochistan is in between Rs 9200 to Rs 9400 while the rate of Phutti is in between Rs 3800 to Rs 5100. The Spot Rate remained unchanged at Rs 9700 per maund. The Polyester Fiber was available at Rs 158 per Kg.
Copyright Business Recorder, 2020