Steady tone on slowdown cotton market


Due to a series of holidays both here and abroad, ready cotton business is likely to remain slow. However, due to a large decline in this year’s cotton output which is now estimated to be nearly 10 million bales (155 kgs), prices have remained steady for the domestic crop. Despite numerous problems being faced by the Pakistani mills like lack of profitability – indeed they are facing large losses – the price of domestic cotton remains steady and stable due to the massive fall in the current year’s (2015 / 2016) output. Mills consumption during the current season is estimated at about 14.5 million bales.

Pakistani mills face utility shortages and interruptions, low cotton output, poor quality of lint, high cost of doing business due to expensive inputs compared with those of traditional competitors and piled up refundable funds lying with the government departments since a long time. As a result, exports of textile products have fallen sharply over the previous months.

The Punjab textile industry has suffered immeasurably and has reportedly complained since a long time against the indifference of the government concerning the very serious problems it is facing. All representations by the All Pakistan Textile Mills Association (APTMA) have fallen on deaf ears while the industry continues to suffer interminably. The chairman of APTMA (Punjab), Amir Fayyaz, has reportedly condemned the government’s indifference towards the Punjab based textile industry which has not only led to large declines in exports, but has also led to the closure of more than a hundred textile mills.

The seed cotton (Kapas / Phutti) prices in Sindh reportedly ranged from Rs 2,100 to Rs 3,000 per 40 kgs, while in the Punjab they are said to have extended from Rs 2,100 to Rs 3,100 per 40 kgs, according to the quality. Lint prices are said to have ranged from Rs 4,700 to Rs 5,600 per maund (37.32 kgs) on Wednesday, while in the Punjab they also reportedly ranged from Rs 4,700 to Rs 5,600 per maund in a slow but steady market.

Thus the general price tone of cotton remains steady on both the global as well as the domestic markets as per the traders contacted. As far as the domestic cotton prices are concerned, they may not go much lower due to a short crop in Pakistan this year (2015 / 2016). Furthermore, shortage of good quality of lint is being reported in the domestic market, while imported cotton remains expensive.

Yarns and textiles in general being weak and Nonremunerative, their business remains lukewarm in our market. Even though the general global cotton output remains on the much lower side according to the traders, lint prices remain stable and are mostly rangebound. Though the textile industry is not doing well, global cotton prices are reported to be stable but the volume of business remains on the low side.

On the global economic and financial front, the outgoing calendar year (2015) did not provide any meaningful hope for a global economic recovery. The leading economy of the world viz the United States at best scraped through from a reversal of fortunes but did not exhibit any demonstrable progress as had been expected earlier. Hardly scintillating as some had envisaged earlier. With an economic decline and hardly any pickup in the global economy, we are destined to start the new year ie 2016 with ample dismay and hardly any hope for progress in the foreseeable future.

After much caution and procrastination, the US Federal Reserve did increase the interest rates upto half a percent from the earlier zero to 0.25 percent. But the desired confidence in the American economy is lacking amongst the financial stalwarts. No clear signals are available that the American economy has turned the corner.

Thus it is patently clear that any rise in the US interest rates as symbolically announced by the Federal Reserve will not provide the necessary stimulus to the American economy, let aside the global economy. Indeed the American economy is still treading on flimsy grounds with little incentive to provide a palpable hope to the veritable investors.

The American economy is reported to be at a standstill with little hope to sustain inflation. Indeed many economies around the world are flat with no rise in prices visible to sustain the several resuscitating economies. Deflation seems to prevail in several run down economies.

Besides the United States, the second largest economy of the world, namely China, seems to be facing a plethora of incurable problems. Indeed the calendar year 2016 has hardly been a propitious year of China.

It is not only the United States or China which have to show progress with demonstrable economic growth, even the emerging markets like Brazil or South Africa, or such countries like Canada or Australia, are struggling with their deep-entrenched problems. Besides the 4.2 percent devaluation of the Yuan during 2015, the debt turmoil in Latin America and the sizeable losses in the stock markets in Singapore which have become so sizeable that they appear to match those of Greece, hardly any hope seems to appear to foresee a global economic recovery any time soon.

Thus we see that any improvement in the global economy at best remains patchy. The United Kingdom growth rate has been revised downward for the third quarter and was thus less than estimated previously. The housing industry in the United States suffered in November, 2015. In brief, the global economy has yet to go a long way before it starts to grow again palpably.