Source: Business Recorder

RECORDER REPORT

Oct 17, 2020

KARACHI: The local cotton market remained stable on Friday. Market sources told that due to increase in the rate of cotton the buyers were not taking interest. The rate of cotton reached at ten years high of Rs 10,200 per maund.

Cotton Analyst Naseem Usman told that supply of Phutti is 19% less than previous year. The rate of cotton is increasing due to the non availability of quality Phutti in the market. Naseem also said that due to the high prices ginners in Lower Sindh were closing the mills adding that instead of making cotton ginners were involved in trading of Phutti.

He also told that the Federal Board of Revenue will not charge additional custom s duty (ADC) and regulatory duty on the import of various items of textile sector. The regulatory duty would not be applicable on the import of woven fabrics of artificial filament yarn, woven fabrics of artificial staple fiber, and few other items.

All Pakistan Textile Mills Association and Pakistan Ready Made Garments Manufacturers and Exporters Association Wednesday rejected the frequent increase in the prices of gas and electricity, as the move, they say, continues to make Pakistan’s products uncompetitive in the international market.

Naseem said that this year Afghanistan has a record crop of cotton and the quality is also said to be very good. Cotton is being exported to Pakistan which is estimated to be around 200,000 bales. Yesterday Afghani cotton trade deals ranging from Rs 10,150 to Rs 10,200 were recorded. He also said that government should allow the import of quality cotton seeds as they had allowed the import of cotton from abroad.

Naseem further said that as per synthetic and Rayon Exports Promotion Council (SRTEPC), Pakistan’s textile profits fell by 62 per cent Y-o-Y in FY20 due to a dismal Q4 FY’20 performance. Its textile exports dropped by 6 per cent Y-o-Y to $12.5 billion due to lower quantity exported. In the first eight months of FY20, Pakistan’s textile exports increased by 8 per cent Y-o-Y. They dropped by 29 per cent Y-o-Y in last four months due to either postponement or cancellation of orders amidst COVID-19.

Textile revenues declined 21 per cent Y-o-Y due to the closure of retail shops during the lockdown period. As a result, overall revenues declined by 3 per cent Y-o-Y in FY20. Gross margins too declined by 2.2 per cent Y-o-Y. This was largely due to weak economies of scale due to the pandemic, higher cotton prices as local production declined further, and higher energy costs. Cotton prices jumped by 5per cent Y-o-Y to Rs8,984/mound during 2QFY20, the main cotton procurement period, over the news of cotton shortage.

Meanwhile Australian cotton growers could be the latest victims of increasingly bitter trade tensions with China. Chinese spinning mills have been told to stop buying Australian cotton and the industry could soon face tariffs of up to 40 per cent. Cotton millers in China are given an import quota each year and have been told they might not receive the allowance if they buy from Australia.

Australia sells about $800 million worth of cotton to China each year and industry groups are disappointed by the deterioration in export conditions. Cotton Australia and the Cotton Shippers Association are working with the federal government to investigate what is going on. “The Australian cotton industry will continue having meaningful conversations with stakeholders to fully understand this situation,” they said in a joint statement on Friday.

“We will continue working with the Australian government to respectfully and meaningfully engage with China to find a resolution.” Trade Minister Simon Birmingham is seeking clarity from Chinese officials. “Our cotton exporters have worked hard to win contracts and establish themselves as reliable suppliers of high quality cotton in the Chinese market, which is an important input for many Chinese businesses,” he told AAP.

“China should rule out any use of discriminatory actions against Australian cotton producers. “Impeding the ability of producers to compete on a level playing field could constitute a potential breach of China’s international undertakings, which would be taken very seriously by Australia.”

China has targeted Australian beef, barley and wine in recent months and has reportedly enforced a go-slow on importing coking and thermal coal. Home Affairs Minister Peter Dutton said the government was working closely with the cotton industry to ensure exports could make it to market.

ICE cotton futures were little changed on Thursday as market participants were in a wait-and-watch mode ahead of the weekly exports sales report by the US Department of Agriculture. Cotton contract for December was steady at 68.96 cents per lb by 1:36 pm.

“The export sales data is tomorrow and investors are expecting to see more sales to Pakistan and Vietnam rather than China. The yarn business is going well in those two countries and they are fond on the US cotton,” said Jordan Lea, senior trader at DECA Global. “Technically, cotton will target the price of 70 cents on the upside, while support could be around 66 cents,” Lea added.

(Source: Business Recorder)