KARACHI: The local cotton market remained stable on Wednesday. Market sources told that mills were involved in cautious buying due to which the trading volume remained low.
Cotton Analyst Naseem Usman told that cotton stockpiling fell a massive 43 percent to 3.45 million bales till October 31, raising concerns that the country would have to import at least 7.0 million bales worth $3 billion to fulfil domestic demand, industry officials said on Tuesday.
Cotton arrivals declined 43.38 percent to 3.45 million bales against 6.09 million bales in the same month last year, as heavy monsoon along with sowing substandard seeds took a toll on total yields, said the last report released by Pakistan Cotton Ginners Association (PCGA).
Punjab and Sindh showed declines of 45 percent and 41 percent respectively in cotton production during the period under review. Both provinces had stocked 1.7 million bales each till the end of October. Last year, Punjab and Sindh stocked 3.16 million and 2.92 million bales, respectively.
Karachi Cotton Brokers Association Chairman Naseem Usman said that a decline of 2.6 million bales in cotton arrivals was a point of concern. “Total expected cotton arrivals are around 5.5 million bales, and there would be need to import at least 7.0 million bales, as consumption demand of local mills was around 14 million bales.” An import of 7.0 million bales would cost nearly $3 billion to the country.
Fortnightly flows (October 15-31) remained down by 54 percent at 763,997 bales against flows of 1.65 million bales during the same period last year.
Till October 2020, textile companies bought 2.5 million bales while exporters bought 17,600 bales (down 58 percent from 41,960 bales last year). Mills have acquired 2.57 million bales, which showed a decline of 42 percent from last year’s 4.42 million bales.
Stakeholders said the major reason behind steep fall in production of cotton was unavailability of good quality seeds, absence of new seed technology, heat waves, climate change, and pest attacks.
Mirpurkhas and Sanghar districts in Sindh incurred huge losses on account of heavy monsoon rains. As a result, the province suffered 25 percent crop loss. In Punjab, the affected districts were DG Khan, Muzzafar Garh, Rajanpur and Multan.
Despite the fact that cotton is an important cash crop, which contributes significantly to the national economy by providing raw material to the local textile industry, as well as cotton lint for export, policy makers failed to introduce quality seeds in the country.
Currently, 864,245 bales are in stocks with ginners, down 47 percent, compared to 1.62 million bales last year.
On the other hand The All Pakistan Textile Mills Association (APTMA) and Pakistan Hosiery Manufacturers and Exporters Association (PHMA) have locked horns over the duty-free import of cotton yarn.
The PHMA has demanded the government abolish customs and regulatory duties on import of cotton yarn, claiming that the basic raw material was unavailable for apparel and home textile sectors in local markets which may lead to a decline in textile exports.
Former PHMA chairman Shahzad Azam said that the spinning sector was allowed to import cotton free of duty, but the apparel and home textile sector were not allowed the same, which, according to him, was a discriminatory practice.
When asked about the reason why government should allow duty-free import of cotton yarn when it could damage the local spinning industry which already produces the material with more than 13.4 million spindles in use, Azam replied, “Why should we buy expensive cotton yarn from them when we can import it at cheaper rates?”
The former PHMA chairman alleged that spinning millers have formed a cartel and were blackmailing them by selling cotton yarn at higher rates.
“It is our right to import the material at duty-free prices just like spinning mills are allowed to import duty-free cotton,” he added, reiterating that the government must concede to their demand if it wished to control a decline in exports.
Meanwhile, APTMA Punjab Chairman Abdul Rahim Nasir said that there was no shortage of cotton yarn in the country. “In fact, the import of cotton yarn during the first quarter of FY20 was 11,047 tonnes, while it rose to 13,976 tonnes in Q1FY21, showing an increase of 27pc,” Nasir shared.
In addition, he maintained, yarn exports have also reduced significantly, signifying an enhanced supply to further processing and value addition in the country.
Nasir said that the apparent ‘shortage’ being touted was based on commercial considerations that have affected the price of yarn worldwide; exporters have booked orders at an exchange rate of Rs168-170 to a US dollar while the current exchange rate was Rs161.5, leading to a hike in the cost of pre-booked export orders.
He added that similarly, cotton which was being traded at 63.8 cents/lb just three months ago was currently at 76 cents/lb, increasing the cost of yarn proportionately.
The APTMA official stated that Pakistani exports would miss Christmas orders due to a “shortage of yarn” was false as manufacturing and shipping procedures require at least 3 to 4 months, a timeframe which has long passed.
“The real issue is rooted in incorrect export pricing and misplaced expectations on the exchange rate,” he said. It may be noted here that duty-free import of yarn for re-export after further processing has always been readily available to registered exporters through Duty and Tax Remission for Exports (DTRE).
“APTMA has and always will support the import and simplification of procedures for duty-free raw materials or other inputs for export purposes,” Nasir said.
Further, he said that the argument that a reduction in taxes would increase supply or reduce costs for exporters was illogical, as exporters were already entitled to the duty-free import of yarn through DTRE or bond. APTMA emphasises that any blanket approval for import of duty-free cotton yarn would lead to dumping of the material and would also result in the facility’s misuse.
“This will result in the closure of many of units and the stopping in the track of many expansions and new projects which are planned or are underway, thereby hampering the progress made by the economy in recent months owing to export-led growth,” the APTMA Punjab chairman said.
He said that the government must take yarn exporters’ concerns into account and note the real values of yarn’s import and export to prevent misinformation and rectify the root cause of the problem. “A shortage certainly does not seem to be the problem here,” he added.
Naseem told that as a silver lining among all the economic volatility amid the coronavirus pandemic, a number of the world’s renowned apparel brands are shifting their orders to Pakistan.
The development was shared by Advisor to Prime Minister on Trade and Investment Abdul Razak Dawood, who said that more and more brands are shifting to Pakistan. “We just heard that Hanes, Guess, Hugo Boss & Target have shifted orders from China to Pakistan,” said Dawood in a tweet post.
“This is a good trend and I am very hopeful that this will continue. I hope that the exporters will capitalize on this opportunity,” he added.
Back in July, the luxury brand Hugo Boss considered a fashion giant placed its first sportswear order to Sialkot based leading firm. The achievement was due to the effort of the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) which hold the 35th IAF Fashion Convention in November last year.
On the other hand, addressing the concerns of apparel manufacturers, the Ministry of Commerce held a meeting of stakeholders of spinners and apparel manufacturers to discuss the availability of yarns and their prices. In light of rising prices, MOC is considering reducing duties on various yarns and preparing a summary for the ECC.
“Apparel is the engine of growth in the textile sector and the availability of yarn at competitive prices is the pillar of strength. All sectors have to play their respective roles to maximize overall exports,” said Dawood.
Prime Minister of Pakistan, Imran Khan, along with federal ministers unveiled another incentive package (reduction in the industrial power tariff) yesterday to spur economic growth, boost industrialization and increase exports of the country
As per the prime minister, with the current tariff structure, our power tariff was on average 25% expensive to our regional peers resulting in our cost of production to be comparatively higher thus making our exports uncompetitive. The package announced is to incentivize the local small, medium and large size industries to lower cost of production and make them competitive locally as well as internationally. It is also believed that the package will help businesses to grow and create numerous employment opportunities as well.
It is pertinent to note that the package is a proposal currently and is being sent to the industries and will be approved through cabinet in due course.
Naseem told that 2000 bales of Khairpur were sold in between Rs 8950 to Rs 9200 per maund, 1800 bales of Rohri were sold in between Rs 9000 to Rs 9300 per maund, 200 bales of Haroonabad, were sold at Rs 10050 per maund, 600 bales of Khanpur were sold at Rs 10,000 per maund, 400 bales of Rahim Yar Khan were sold at RS 9900 per maund, 800 bales of Mianwali, 1600 bales of Sadiqabad were sold at Rs 9800, 400 bales of Layyah and 400 bales of Alipur were sold at Rs 9500 per maund.
He told that rate of cotton in Sindh was in between Rs 8500 to Rs 10,000 per maund. The rate of cotton in Punjab is in between Rs 9800 to Rs 10,200. He also told that Phutti of Sindh was sold in between Rs 3200 to Rs 4800 per 40 kg. The rate of Phutti in Punjab is in between Rs 3500 to Rs 5000 per 40 Kg.
The rate of Banola in Sindh was in between Rs 1450 to Rs 1900 while the price of Banola in Punjab was in between Rs 1850 to Rs 2100. The rate of cotton in Balochistan is in between Rs 9600 to Rs 9700 while the rate of Phutti is in between Rs 4700 to Rs 5100.
The Spot Rate remained unchanged at Rs 9700 per maund. The Polyester Fiber was available at Rs 158 per Kg.
Copyright Business Recorder, 2020
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