KARACHI: Bearish trend continued in both local and international cotton markets. In the first month of the new cotton season in the country, the price of cotton dropped significantly by Rs. 7,000 per maund, the price of Phutti dropped by Rs 3500 per 40 kg and the spot rate decreased by Rs 5300 per maund. All Pakistan Textile Mills Association claimed that exports will be affected due to suspension of gas supply to the industry.
The Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has issued a SOS call over acute financial crisis in the industry amidst delaying sales tax refunds, rising mark-up rate, soaring fuel and energy cost and worsened power shutdowns, expressing a fear of breakdown in whole export-oriented textile supply chain in the county.
Cotton prices continued to decline in the local and international cotton markets during the last week. The rate of cotton after the decline of Rs 2500 per maund was in between Rs 16000 to Rs 17000 per maund while the rate of Phutti after witnessing a decline of Rs 1500 reached in between Rs 6500 to Rs 7600 per 40 Kg. In Punjab both the rate of cotton and Phutti was Rs 70 to Rs 75 more, respectively as compared to their rates in Sindh.
Within a month of the start of the new cotton season, the price of cotton which was Rs 23,000 per maund fell by Rs 7000 per maund and was in between Rs. 16,000 to Rs. 16,500 per maund. The spot rate has also come down from Rs 22,000 to Rs 16,700 per maund. It witnessed a decline of Rs 5,300 per maund.
The New York Cotton Market’s rate of Future Trading fell by about 58 US cents.
Textile and spinning mills are interested in buying cotton due to low prices. Business volume has been very high. Due to the possibility of rains before Eid, many mills are making deals for delivery after Eid.
The demand for cotton yarn has declined, while the financial crisis is increasing in the market. However the rate of US dollar is also decreasing.
According to reports, due to continuous rise in prices of energy and petroleum products and the possibility of further increase in interest rates and prolonged load shedding, some millers are thinking about closing their mills for about a week along with the Eid-ul-Adha holidays. According to the information received from Faisalabad, sizing and cotton looms have already been closed down there.
Meanwhile, textile mills in Punjab have been shut down for eight days.
Overall, bearish trend continued to prevail in international cotton market.
The rate of Future Trading for the month of December closed at 197 American cents after fluctuations. The rate of cotton in Sindh is in between Rs 16,000 to Rs 16,800 per maund, the rate of Phutti in Sindh is in between Rs 65,00 to Rs 7000 per 40 kg. There is a pressure on the rate of Khal and Banola. The business was slow in Punjab due to rains.
The rate of cotton in Punjab is in between Rs 16,800 to Rs 17,000 per maund; the rate of Phutti is in between Rs 6500 to Rs 7000 per 40 kg while downward trend was seen in the rate of Khal and Banola.
The rate of cotton in Balochistan is in between Rs 16,700 to Rs 16,800 per maund while the rate of Phutti is in between Rs 68,00 to Rs 72,00 per 40 Kg,
The Spot Rate Committee of the Karachi Cotton Association decreased the spot rate by Rs 2100 per maund and closed it at Rs 16,700 per maund.
Naseem Usman, Chairman, Karachi Cotton Brokers Forum, said that cotton prices in international cotton markets continued to decline. According to the USDA’s Weekly Export and Sales Report, 48,100 bales were sold for the year 2021-22, which was significantly higher than the previous week.
Vietnam topped the list with 33,900 bales. China came in second with 25,400 bales. Mexico came in third with 3,500 bales.
However, 46,300 bales were sold for the year 2022-23.Turkey topped the list with 25,500 bales.
Portugal came in second with 8,800 bales. Mexico came in third with 3,700 bales.
All Pakistan Textile Mills Association (APTMA) has sought Prime Minister’s help for restoration of gas to the textile industry as it is hurting exports.
APTMA’s Patron-in-Chief, Ijaz Gohar, in a letter to Prime Minister, Shehbaz Sharif stated that textile industry had achieved a new record in terms of exports reaching nearly $20 billion from $12.5 billion just two years ago. The fantastic growth was enabled by implementation of Regionally Competitive Energy Tariff (RCET), investment of over $5 billion in expansion and establishment of 100 new textile units resulting in enhanced export capacity of $500 million per annum.
“It is inexplicable that the exporting sector, which has the capacity to deliver over $2 billion in exports per month, is being denied energy/ gas and consequently exports will be significantly lower, much to the detriment of Pakistan’s economy.”
According to APTMA, gas/ RLNG to industry has been suspended from July 1, to July 8, 2022 with Eid holidays from July 9 to 14 July –a shutdown of a total of 15 days that will translate into a loss of at least $1 billion. More than 50 percent of output will be lost this month, with the very real risk of losing orders on a permanent basis, as well as, loss of repeat business due to delays in delivery of orders.
Gohar maintained that textile exports were expected to increase to $25 billion plus in the coming fiscal year and if that momentum was lost due to energy supply and cost constraints, Pakistan would be forced to seek additional $6 billion in loans from abroad which under the circumstances may not be possible. “Textiles have repeatedly delivered their commitments and proven that they are a viable and long-term solution towards economic stability.”
He requested that under these circumstances, gas/ RLNG supply of export-oriented industry be restored immediately.
The Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has issued a SOS call over acute financial crisis of the industry amidst delaying sales tax refunds, rising mark-up rate, soaring fuel and energy cost and prolonged power shutdowns.
In an appeal to the Prime Minister, Chief Justice of Pakistan, Chief of the Army Staff, Finance Ministry and Commerce Ministry, PRGMEA north zone chairman Sheikh Luqman Amin stated that the situation has not improved at all despite various appeals to the concerned departments.
“Now we are sending an “SOS call: Apparel industry amidst acute financial crisis and the ensuing breakdown of value-added textile chain”, which needs a quick response, as country needs dollars and we are fully capable of doing this. We have plenty of orders to earn dollars but having no level-playing field to fulfil these orders due to indifferent and callous attitude of the authorities,” he added.
Calling for quick and serious steps to sustain the growth of apparel exports, Sheikh Luqman Amin said that the new Textile Policy had made a commitment to the provision of gas and electricity at competitive international prices, a continuation of tariff rationalization, and sticking to the policy of duty drawback on local taxes and levies.
He lamented that the previous Textile Policy had also failed to achieve its targets, including enhancing textile exports from $ 13 billion to $ 26 billion, doubling value-addition from $ 1 billion per million cotton bales to $ 2 billion per million cotton bales, as well as, the creation of three million jobs in five years.
It was good news that after the expiry of last Textile Policy the government came up with a new policy, comprising new targets, incentives and recommendations while all stakeholders were also taken on board before the finalization of the new policy, which was a good sign for the economy and industry but it should also be implemented, he demanded.
He expressed the hope that Pakistan can achieve this target provided the local industry is facilitated with regionally competitive energy tariffs and a business-friendly environment.
Sheikh Luqman Amin urged for increasing ease of doing business, lowering cost of production, paying early refunds to solve liquidity crunch, relaxing import policy for industrial raw material, and equalizing the energy tariff across the country.
He said all the stuck-up claims, including DLTL, DDT, Customs rebates, and sales tax rebates, which are pending for the last six months, should be released.
He voiced the fear that the government has not been able to release the sales tax refund claims regularly because amount of exporters’ liquidity has been started to stuck up with the government due to faulty and defective system.
He asked the government to work on a fast track plan to address energy issues too. Priority should be given to the export-oriented garments sector, which was the highest value-added link in the entire textile value chain. PRGMEA leader called for exemptions from power outages for exporting SMEs, as the power crisis across Pakistan has intensified and overall electricity shortfall getting worse.
The PRGMEA regional chief urged Prime Minister Shehbaz Sharif, Chief Justice of Pakistan Umar Ata Bandial, Chief of the Army Staff General Qamar Javed Bajwa to intervene as it is the national interest and direct the tax agency to remove bottlenecks in the new refund payment system of the FBR, as exporters are facing a severe liquidity crunch due to delay in payment of sales tax refunds.
Copyright Business Recorder, 2022