HIGHLIGHTS: ICA-Cotton Event-Dubai-2011

The International Cotton Association-Liverpool (UK) -a global apex body of raw cotton trade and arbitration, held a two-day (15th and 16th March, 2011) cotton event at Dubai under the patronage of His Highness Sheikh Ahmed Bin Saeed Al Maktoum-President of the Department of Civil Aviation, CEO and Chairman of The Emirates Group and chairman of Dubai World which was largely attended by 600 delegates from 34 countries - more than 60 percent from India, Bangladesh, China and Pakistan.
The theme of this Cotton Event Dubai-2011 was open to the world and it was the second such meeting after Singapore in 2010. Ray Butler, the president of the International Cotton, - Liverpool welcomed His Highness Sheikh Ahmed Bin Saeed Al Maktoum, the chief guest, the high profile speakers and the distinguished participants and thanked them for making this even colourful. 10 high profile speakers from cotton and textile industries delivered their lectures enlightening the unprecedented rise in cotton prices and necessary measures to fight such price abnormality in cotton market. The key-note speech was delivered by Ahmed Bin Sulayem, Executive Chairman of Dubai Multi Commodities Centre, Dubai (DMCC).
A strategic initiative of the Government of Dubai, the Dubai Cotton Centre (DCC) is a 100 percent owned subsidiary of the DMCC and aims to facilitate cotton trade flows via port Jabel Ali in Dubai (UAE). It was launched in 2008 with the primary aim of consolidating the Emirate's position as a key link in the global cotton supply chain between Central Asia, particularly Uzbekistan - a prominent cotton producing and exporting country of Commonwealth of Independent States (CIS) countries and the cotton consuming economies in the wider Asian market. The DCC has done a robust re-export business of 50,000 metric tons of raw cotton with CNF value of 100 million US dollars and last year did a maiden re-export business of 750 metric tons of Indian organic cotton.
Joseph Rodgers, Senior Manager, FIMBank plc, DIFC branch, UAE delivered his lecture titled " Structured Trade Finance - the right panacea" highlighting relevant topics of importance of cotton, salient features of Structured Trade Finance, importance of STF, wide array of STF products, benefits of STF, major risks, political risks, risk mitigation-political risk, price volatility risk, credit risk, risk linked with warehousing, performance risk, methods of payments, issues related to Letter of Credits and others etc.
He further emphasised on right application of risk management tools to make trade profitable.
Ray Butler - the President of International Cotton Association delivered his talk on high volatile situation in cotton market and the working of ICA for the promotion and smooth performance of cotton trade briefly touching the related topics of fundamental principles, a decade change, some challenges, vision, engaging with other associations, sustainability, board composition, transparency, ICA Arbitration, and small claims etc.
I.J. Dhuria, Corporate General Manager, Yardhman Textiles Ltd., India, delivered his exhaustive lecture on "India's Role in Global Textiles" touching main points including Asia as an emerged textile hub, China, India, Pakistan and Bangladesh being textile giants of the world textiles. Dhuria said that in next 10 years, India might assume a very important position in textile exports as China 's textile and clothing production may largely be absorbed locally as China's driving force in improving their retail buying of consumer goods.
Dhuria took support of relative statistics to prove his version that generally the Asia but particularly the Southeast Asian countries with China would play even a dynamic role in textiles. Some of his tables are posted here for the interest of the readers.
Dr Qaumrul Ahsan, Ph. D, Editor-in-Chief, "Cotton Bangladesh" delivered a very informative and interesting lecture on " New initiatives in the Bangladesh textile industry" mentioning history of textiles, its developmental growth stage by stage, supportive governmental policies, very important role of women workers particularly in promotion of textile industry but particularly in the promotion of garment industry and support of developed countries specially European countries and USA who facilitated Bangladesh textile and garment exports to their countries by offering some relaxation in foreign trade.
Dr Qaumrul Ahsan also mentioned that in the last 2-3 seasons, they have learnt that sourcing of cotton and exports restricted to the export of garments claiming more than 80 percent share in total exports are security hazards not for economy but to the country as well. Dr stressed on the availability of raw cotton irrespective of its price as Bangladesh is producing its own crop meaningfully. He further deplored that shortage of energy is badly restricting further expansion of domestic textile and garment industry. The weak backward linkage process of spinning, weaving and finishing often pose threats to the industry. As such, import sources of raw cotton, yarn, cloth and other garment accessories should be found which should be reliable, regular and long-term in supply to ensure growth of garment industry.
Bashir Ali Mohammad, Chairman, Gul Ahmed Textile Mills-Karachi and President of International Textile Manufacturing Federation (Karachi chapter) gave an exhaustive speech on "Consequences of Soaring raw material prices on the textile industry of Pakistan and the world" emphasising the present volatility in cotton and textiles prices. He explained the cotton and textile situation in retrospect based on relevant statistics. He said that in 2007 and 2008, economic slow down and economic meltdown specially in US and European economies resulted in large scale defaults and declaration of bankruptcies in banking, cotton trade and servicing sectors but in 2010 recovery in economies was witnessed which further continued.
Bashir Ali Mohammad said that high volatility in cotton market did not let cotton spinning sector to pass on all extra cost to value added sectors and only composite mills could absorb high raw material cost to some extent. He said that our textile exports have registered increase of 28 percent but almost in unit price and value of shipments corresponding to the increase in raw material prices. In terms of export volume, our textile exports have decreased. Data tables are posted to let the readers have better look on exports.
Gao Sheng of Beijing Cotton Outlook Consulting Company ltd., China delivered his lecture on " Opportunity and challenge for China cotton market". According to his lecture, volatility in cotton market has adversely impacted China textile industry and its exports. 25 percent increase in labour cost has squeezed profit margins of textile industry and further year to year increase in labour wages may let textile export orders divert to other competing countries such as India and Bangladesh. In 2009-10, cotton prices of China cotton increased by 39 percent while prices of imported cotton increased by 50 percent. In 2010-11 increase in China cotton is 68 percent while in imported cotton increase is 123 percent. In 2010-11, China produced a lower crop of 6.25 million tons against 7.85 million tons in 2008-09. In 2009-10, textile and garments exports increased to 191.90 billion US dollars -12 percent higher than last year. In 2009-10, yarn production was 26.42 million tons, 17 percent higher than last year.
In 2009-10, China produced 36.96 billion sq. meter of cotton fabric, 21.8 percent higher than last year. In 2009-10, China imported 2.51 million tons of raw cotton, 1.06 million tons higher than last season.
In the period 2008-09/2010-11, China's government's reserves decreased from 40.8 million tons to 18.5 million tons. The continuing strong appreciation in RMB is negatively affecting its export potential. China will continue to depend on imported for long time as substantial increase in cotton area may be 80 million mu. In 2011-12, China is planning to increase its cotton area by 6.24 percent, US cotton area by 18.2 percent, Australia 50 percent in 2010-11. Other countries like India, Pakistan, Uzbekistan and Brazil are also expected to increase their respective cotton area suitably.
Lastly, Nick Earlam, executive chairman, Plexus group of companied delivered his lecture on "Where will cotton be in 10 years' time-A vision for the future". According to his lecture, prospects for cotton production and consumption appear complex. Production constraints will be competition between food and fibres and ethanol would also grab area.
Any increase in cotton consumption would be countered by other m.m. fibres. Improvement in the standard of living would demand more fibre consumption. Only, technological support would be required to increase cotton yields to increase production while increasing area will be difficult. Fashion trends will impact cotton consumption. It appears quite difficult to predict where cotton would be in next 10 years on the face of changes fast taking place. The cotton-event ended on the note of thanks by Ray Butler, President of the ICA.