LAHORE: The Spot Rate Committee of the Karachi Cotton Association (KCA) on Friday decreased the spot rate by Rs 500 per maund and closed it at Rs 21500 per maund. The local market remained steady and the trading volume remained low.
Cotton Analyst Naseem Usman told that rate of cotton in Punjab and Sindh is in between Rs 21000 to Rs 22,000 per maund. He also told that rates of cotton and Phutti witnessed a decrease of Rs 1500 in two days.
600 bales of new cotton from Tando Adam and Hyderabad were sold at Rs 2400 per maund.
A near doubling in benchmark cotton futures to 11-year highs, hard on the heels of a spike in freight and fuel prices, is clobbering Asian apparel makers while their global retail customers are reluctant to soak up the extra costs.
Losses have mounted for garment makers in Asia, among the region’s top employers, with some smaller units suspending operations, rendering thousands jobless, undermining a recovery from the pandemic and posing a fresh challenge for policymakers already battling high inflation. To remain viable, some yarn and garment makers are even replacing cotton with cheaper synthetic fabric.
“Our factories are running at full capacity. But at what prices? We are hardly making any profits,” said Siddiqur Rahman, managing director of Dhaka-based Sterling Group, which supplies to brands such as H&M and Gap Inc. An uncertain outlook for demand from Europe amid the Russia-Ukraine war has added to the woes of apparel makers in Asia - home to the world’s top garment exporters, China and Bangladesh.
Bangladesh exports more than 60% of the garments it manufactures to Europe, Rahman said. In India, world’s top cotton producer, several small apparel makers are struggling to fulfil orders from three months ago, when cotton prices were around a third less than current levels. “Many small units have stopped taking new orders,” said Ashok Juneja, president of India’s Textile Association. India’s cotton prices have more than doubled in a year after rains hit harvest.
Global prices surged 70% over the period, scaling the highest since 2011 in May, with analysts predicting more gains amid drought damage to output in top exporter the United States and a recovery in China’s demand as COVID-19 curbs ease.
Asian garment makers, which also count Walmart Inc and Nike among their customers, rely heavily on Europe and the United States for exports of ready-made garments. While demand rose in the first quarter as the world emerged from the pandemic, fresh China COVID curbs and higher fuel prices amid the Russia-Ukraine conflict stifled it. Shipping costs have quadrupled from pre-pandemic levels and global brands are not absorbing additional costs, Rahman said.
Meanwhile, ICE cotton futures rose more than 3% on Thursday supported by buying from mills, upbeat market sentiment and a weaker dollar.
Cotton contracts for July rose 4.09 cent, or 3.01%, to 140.15 cents per lb, 12:20 p.m. ET. It traded within a range of 134.12 and 140.35 cents a lb. “We see a lot of mills buying here,” said Rogers Varner, president of Varner Brokerage in Cleveland, Mississippi.
Further aiding cotton, the U.S. dollar eased making cotton cheaper for overseas buyers. Cotton futures fell more than 2% on Wednesday as a stronger dollar and fall in wider commodities pressured the natural fibre.
The market is looking at some good chances for rain for mid-week. If rains fail to materialize, or if rainfall totals are light, we may be off to the races on (the December contract),” Louis Rose of Tennessee-based Rose Commodity Group wrote in a note. The Spot Rate Committee of the Karachi Cotton Association on Friday decreased the spot rate by Rs 500 per maund and closed it at Rs 21500 per maund. The Polyester Fibre was available at Rs 305 per kg.
Copyright Business Recorder, 2022