Cotton prices continue to remain firm

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On the eve of the Muharram holidays on the 23rd and 24th of October 2015, asking cotton prices mostly held their earlier high levels even though business reportedly remained scant at the prolonged weekend. Steadiness in cotton prices was ascribed to the concern of the domestic spinners regarding shortage of the current crop (August 2015 / July 2016). Traders said in Karachi the domestic mills have booked considerable quantities of cotton for import from West Africa, Brazil, United States and India.

Yarn prices have generally not been doing well locally. Upon sustained demand from the All Pakistan Textile Mills Association (APTMA), government last week imposed a Regulatory Duty (RD) on the import of yarn. The imposition of RD on the import of yarn has been hailed by APTMA but is being strongly opposed by the several Value-added Textile Associations.

The Pakistan Cotton Ginners Association (PCGA) released its seed cotton (Kapas/Phutti) arrivals report for the current season on the 18th of October 2015 which shows seed cotton arrivals till the 15th of October 2015 to be 4,663,876 lint equivalent bales from which the domestic mills have lifted 3,103,607 bales. Exporters have picked up 297,540 bales while 1,262,729 bales remained unsold with the ginners in both loose and packed form.

Seed cotton prices in Sindh are said to have ranged from Rs 2600 to Rs 3000 per 40 Kgs on Thursday, while in the Punjab they reportedly ranged from Rs 2800 to Rs 3100 per 40 kilogrammes. Lint prices in Sindh reportedly ranged from Rs 4800 to Rs 5500 per maund (37.32 Kgs), while in Punjab they are said to have ranged from Rs 5300 to Rs 5600 per maund, according to the quality.

It is now estimated that total cotton output in Pakistan during the current season (August 2015 / July 2016) may be about 12 million bales (155 Kgs) on an ex-gin basis. Mills consumption during current season is estimated to be about 14.5 million bales. Imports may be about two million bales while the exporters may ship about half a million bales.

Last week Mian Mohammad Abdullah, a well known and highly regarded Pakistani textile magnate with large investments in energy and various other sectors, inaugurated the library bearing his name which he has donated to the prestigious Institute of Business Administration (IBA), Karachi. Mian Abdullah is the Chairman of Sapphire Group of Companies.

The library is a state-of-the-art facility which also contains several modern inputs and equipments which will be highly beneficial to the student community and other scholars. Dr Ishrat Husain, Dean and Director of IBA, welcomed the Chief Guest. The library can accommodate 450 students and has a functional design for students up to the doctoral level.

On the global economic and financial front, volatility reigns supreme which in turn is giving highly uncertain signals regarding the health of the world’s economy. The outgoing calendar year (2015) was deemed by several economists, analysts and commentators as being the year which would at least start providing some positive progress which would eventually put the global economy on a path to revival. However, the year 2015 has turned out to be singularly disappointing and distressing.

To begin with, the year 2015 started with the hope that with the presumed economic progress in America, the Federal Reserve would increase the interest rates which would in turn imply that the global economic condition could also start to improve simultaneously. Then reports were received that the Chinese growth had fallen to 6.9 percent, one of lowest in several years. As time progressed, the weakness of the Chinese economy turned more manifest and became responsible in the slowdown of economies in many parts of the world.

As China is the second largest economy in the world, it consumes large quantities of sundry raw materials and commodities. With the fall in economic growth of China, the producers of several commodities and raw materials from crude oil, gold, silver, iron ore, copper to several agriculture products saw prices of these items fall sharply. Thus several countries like Australia, Russia, Canada, Brazil and South Africa saw their economies lunge to lower levels.

The decline in commodity prices also hit the Middle East including Saudi Arabia and the United Arab Emirates, the United States whose oil production has risen in recent years, Iran and some other countries. That bust in commodity prices further flattened the global economy.

Another prime sector of the global economic infrastructure which has suffered large damage is the banking sector. The credulity and confidence in the banking sector have been damaged largely, which has also hit the global economic mechanism substantially.

Volatility on the shares markets and bourses has remained unusually high over the past several years. In fact, it has undermined the confidence of investors significantly. Indeed new investments are not progressing at all due to the shaky stock markets which have failed to provide credible signals pertaining to the global economy.

Thus we have observed that all is not well on the global economic front. Just like the United States Federal Reserve Bank, the European Central Bank (ECB) has left its key interest rate unchanged at 0.05 percent. Moreover, the ECB is later expected to express its readiness to step up its 1.1 trillion Euros stimulus package. No less than the US presidential candidate Donald Trump has said that the stock market is in the midst of a bubble and he is concerned about this serious situation. He feels that people are being forced to invest in an inflated market and at some point they will get badly hurt.

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