Cotton prices drift downwards

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After a modicum of stability in the domestic cotton prices which were mostly stable and steady over the past week or so, both seedcotton (kapas / phutti) and lint prices went lower on Wednesday. Enough availability of fibre and a higher domestic crop than anticipated earlier and weaker condition on the textile market have resulted in notable decline in fibre values over the past day or so.

Brokers from Karachi informed that seedcotton prices in Sindh ranged from Rs 1,800 to Rs 2,350 per 40 kgs, while in the Punjab they extended from Rs 2,000 to Rs 2,600 per 40 kgs, according to the quality. Lint prices also signalled weakness and in Sindh reportedly ranged from Rs 3,900 to Rs 5,100 per maund (37.32 kgs), whereas in the Punjab they are said to have prevailed from Rs 4,700 to Rs 5,100 per maund, as per the quality.

Bola/s 1-1/16 from Burkina Faso has been reported to be sold into Pakistan over the last fortnight variously between USC 63.00 and USC 64.00/lb February / March 2015 shipment basis. Also, some Brazilian Strict Low Middling 1-1/8 business has transpired around USC 68.50/lb basis into Pakistan. Some imports of cotton from West Africa, Greece, Nigeria and India have also been reported since the last one or two days. Other reports also indicate American origins / recaps business into Pakistan.

Local seedcotton prices declined today and lint prices also decreased commensurately by Rs 100 to Rs 150 per maund (37.32 kgs) in the domestic market. Reports of high global cotton output and larger Pakistani crop have resulted in pressure on the cotton prices. It is estimated that about 14.4 million bales (155 kgs) equivalent of seedcotton has arrived till today (January 15, 2015) into the ginning factories. Total output for the season (August 2014 – July 2015) in Pakistan is estimated to be around 15 million domestic size bales. Reports of weak yarn prices in Pakistan and also abroad are pressurising cotton prices.

Textile industry in Pakistan is not operating properly due to several problems it is facing since several years. Lack of gas supply and shortage of electric power, besides irregular and intermittent supply of these utilities, are major setbacks which hinder the industry to realise its full potential. Otherwise, there is a large scope for the Pakistan textile industry to grow in size and also increasingly contribute towards the production of value-added products.

As per present reckoning, current cotton crop in Pakistan is projected to produce between 14.5 and 15 million domestic size bales (155 kgs) which are also close to the figures the mills need for their consumption. Exporters may ship half a million to 750,000 bales while imports may range from one to 1.5 million bales.

Presently, domestic yarn prices are weak and the mills are also said to be carrying considerable quantities of accumulated yarn stocks. The global movement of yarn is also said to be slow.

On the global economic and financial front, on last Wednesday (January 14, 2015) weak growth reports on a universal basis, save perhaps the United States of America and the United Kingdom where the economies were deemed to be doing well, have hammered equity prices severely. The World Bank report issued on last Tuesday (January 13, 2015) announced in no uncertain terms that its earlier growth assumption for 2015 and the following year have been revised downwards due to poor projections and prospects in the Eurozone, Japan and several leading emerging economies whose performance has been disappointing. The World Bank has now assessed that the global economy may now grow only at the rate of three percent against the earlier forecast of 3.4 percent made in June 2014.

Thus the world economy is moving towards a disheartening juncture and its pace of growth is indeed slow and sluggish. Other observers feel that only counting the United States to pull out the global economy from its present mess would be asking for too much. The other leading economy hitherto deemed to be performing relatively better was said to be that of the United Kingdom. However, now new and all prevailing concerns are being expressed regarding the economic performance of the twosome, viz the United States and the United Kingdom. The global bear fever seems to have struck both of them seriously.

First and foremost, the American retail sales have posted their largest decline in eleven months in December 2014, as demand reportedly fell across the board which would dent any hope which has existed that consumer spending would increase sizeably. Reuters reporting from Washington D.C. added that retail sales fell 0.9 percent last month after an increase of 0.4 percent in November, 2014.

Then the sharp drop in commodity prices sent global stocks values sliding sharply on Wednesday ranging from copper and cattle to cotton. Copper prices in London coupled with the rout in crude oil prices became instrumental in clobbering the shares prices on sundry bourses and equity markets around the world at mid week. Copper prices were humbled to five and a half years low levels with Benchmark LME copper having plunged more than eight percent at one juncture. Similarly, spot iron ore prices descended to the low levels which prevailed in 2009. Other news indicated that Canadian home prices fell in December 2014 for the second month in a row.

As a result of those dour and disconcerting news, many if not most of the shares prices on various global equity markets fell sharply on Wednesday. Wall Street prices tumbled on Wednesday for the fourth day in a row following the negative news of the world economy released recently by the World Bank. Britain’s leading share index FTSE fell sharply lower on Wednesday as slump in copper values clobbered mining scrip. While the European stocks sank due to worries regarding declining global growth, Japanese shares prices fell due to the increased strength of the Yen. Indian shares fell for the second day in a row, while the Australian and Hong Kong shares also dived southwards due to massive decline in commodity prices.

– Brecorder

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