KARACHI: The local cotton market remained stable on Wednesday. Market sources told that trading volume was thin. Sources told that reason behind thin trading volume is shortage of yarn as well as fluctuation in the rate of dollar.
ICE cotton futures rose on Tuesday on mill fixations and on expectations that sparse rains recently may offer little respite for the natural fibre from a dry spell in Texas, a top growing region.
Cotton contracts for May rose 0.50 cent, or 0.6%, to 87.22 cents per lb at 12:52 PM EDT.
“There are concerns about continuing dryness in west Texas; even with the rain that was recorded out there, it is still dry,” said Jim Nunn, owner of Tennessee cotton brokerage Nunn Cotton.
Prices fell as much as 2.3% in the previous session on hopes that rains in west Texas would benefit the crops. “There have been mill fixations with this market drop and we also have seen some new business going on,” Nunn said, adding sentiment in cotton markets got a further fillip from gains in equities markets.
Wall Street’s S&P 500 index scaled a new high on Tuesday, while a gauge of global equities rose to within 1% of an all-time peak.
But stronger US dollar limited cotton’s advance, since it translates into higher prices for buyers holding other currencies.
“We see prices remaining elevated in the coming quarters as supply is tight amid the robust Covid-19 economic recovery and strong pick-up in demand in 2021,” Fitch Solutions said in a note, raising their 2021 average cotton price outlook to 87 cents per lb.
Cotton Analyst Naseem Usman told that textile exports fell 3.1 percent year-on-year and 6.8 percent month-on-month to $1.2 billion in February, the official data showed on Tuesday, as less number of working days during the month compounded the negative impact of high yarn price.
In February, exports of knitwear and bed wear fell 13 percent and 1.2 percent year-on-year, respectively, according to the Pakistan Bureau of Statistics (PBS). The decline was carried out from 10.3 and 7.3 percent contraction month-on-month.
The downtrend was mainly due to downbeat value-added sector that is a key to drive exports growth. However, exports of basis textiles increased.
In February, basic textiles exports – cotton yarn, cotton cloth, non-cotton yarn, and raw cotton —increased 13 percent month-on-month. However, value-added sector and other textiles witnessed a decline of 11 and 10 percent, respectively.
Textile exports declined mainly due to 11.6 percent decline in volumetric sales, said Topline Research.
Exports declined 6.7 percent in dollar terms and 7.3 percent in rupees term due to lower number of working days in February. “In last six years, February textile exports have fallen in range of 1-10 percent – except for February 2020,” the brokerage said in a flash note.
Within basic segment, cotton yarn increased 40 percent month-on-month to $120 million thanks to 35 percent rise in quantity that was exported.
Within value-added segment, knitwear, bedwear, towel and ready-made declined 10, 7, 11 and 15 percent month-on-month, respectively. In 8MFY2021, textile exports rose 6.6 percent to $10 billion, up 11 percent in rupee terms, due to the benefit coming from diversion of orders from India, and Bangladesh. Similarly, US-China trade war has also helped textile exports of Pakistan, said Topline Research.
Value-added sector for 8MFY21 witnessed an uptick of 12 percent to $6.9 billion due to better pricing. The monthly declining trend in textile exports that account for over 60 percent of total exports is a bad sign for the economy that is struggling to come out of sluggish growth cycle.
Exports had recovered to pre-COVID monthly level of $2 billion in September, October and November and the recovery was due to low value-added apparels and home textiles.
Exporters have been warning of falling exports due to increase in yarn prices amid cotton shortage. If the government doesn’t take up the matter seriously, the gains it is taking due to diversion of export orders could be lost.
Pakistan couldn’t benefit from the US trade restrictions on China to increase exports due to much reliance on cotton-based textiles contrary to the growing global demand of manmade fibres, Ehsan Malik, chief executive officer of Pakistan Business Council said in December last. The country’s export portfolio is largely cotton based, whereas there is a fastest growth in demand of manmade fibres in the international market and the US, the biggest destination for Pakistani goods, Malik said.
Naseem also told that rate of cotton in Sindh was in between Rs 10,300 to Rs 11500 per maund. The rate of Phutti in Sindh is in between Rs 4500 to Rs 5100 per 40 kg. The rate of cotton in Punjab is at Rs 12500 per maund. The rate of Phutti in Punjab is in between RS 4800 to Rs 6300 per 40 kg.
The rate of Banola in Sindh was in between Rs 1600 to Rs 2000 while the price of Banola in Punjab was in between Rs 1800 to Rs 2250. The rate of cotton in Balochistan is Rs 12000 per maund. The rate of Phutti of Dalbadin Balochistan is available at Rs 6300 to Rs 6400 per 40 Kg.
The Spot remained unchanged at Rs 12300 per maund. The rate of Polyester Fiber was increased by Rs 2 per Kg and was available at Rs 220 per Kg.
Copyright Business Recorder, 2021