Despite the fact that hardly 50,000 to 60,000 bales of unsold cotton from current crop (August 2014 / July 2015) are left with the ginners, a sharp fall of about Rs 200 per maund (37.32 Kgs) in the prices of cotton has been reported from the ready market. Serious problems of energy shortage, introduction of new taxes in the recent federal budget, hardships in administration of new taxes and difficulties in claiming refunds, decrease in demand and prices of yarns in China have all clustered together to put the domestic textile industry into serious difficulty.
Pakistani mills are blaming the government for the slowdown of their business due to imposition and increase in taxes which has hit the domestic industry badly. There are also reports of partial or complete closure of some textile mills in recent months. Other mills have either switched to finer counts of yarns or gone into spinning chemical fibres. Thus Sindh styles of current crop cotton (2014/2015) are now being offered between Rs 4000 to Rs 5300 per maund (37.32 Kgs), according to the quality, while lint from Punjab is reportedly being offered form Rs 4700 to Rs 5400 per maund. About five ginning factories in Sindh are said to have started ginning the new crop (August 2015 / July 2016), while in the Punjab three ginning factories have commenced pressing the new crop.
According to one report, there are hardly any buyers for good quality local lint even at Rs 5000 per maund ex-gin which has been computed to about US Cents 60.70 per pound. New crop (2015 / 2016) seedcotton prices in Sindh which started selling at Rs 2700 / Rs 2800 per 40 Kgs are now being quoted from Rs 2500 to Rs 2600 per 40 Kgs. Similarly, seedcotton from Punjab which started selling earlier at Rs 2900 / Rs 3000 per 40 Kgs is now being offered lower from Rs 2700 to Rs 2800 per 40 Kgs, according to quality. It is now presumed that new crop lint may start selling at Rs 5000 per maund or less in the foreseeable futures.
So dull is the local cotton market that there are hardly any enquiries for imported cotton at this juncture. Moreover, due to low seedcotton and lint prices in our market, the farmers may suffer badly this season. Earlier in the session on Thursday, 200 bales of new crop cotton (2015/2016) from Sanghar in Sindh sold at Rs 5300 per maund (37.32 Kgs), while 200 bales from Kotri sold at Rs 5200 per maund. Later on there was increased pressure on cotton prices in the evening.
According to one mill report, low advices for Pakistani yarn export to China are being received. The yarn prices for export to China are reported to be so low that they would only be feasible if cotton prices come down to Rs 4600 / Rs 4700 per maund. Thus yarn prices are said to be in bad shape.
On the global economic and financial front, the fate of Greece and its timely repayment of its debts, primarily to the International Monetary Fund (IMF), European Union and the European Central Bank amongst others, remained of crucial importance. Thus all eyes were reportedly fixed on the meeting of the 19 Eurozone countries whose representatives were to meet on Thursday in Luxembourg to try and sort out the precarious Greek financial issue said to be close to a default.
In this connection, the Greek Prime Minister has warned that his country's exit from the Eurozone and European Union would not only necessarily hit the Eurozone adversely, but it would also create a catastrophe which will travel to various corners of the world. Thus the Greek Prime Minister Alexis Tsipras warned of the catastrophic fallout which would ensue if Greece were allowed to fail in its repayments. Such an eventuality could grip the entire globe in a major financial collapse.
On the other hand, there is the United States Federal Reserve which believes that the American economy has become strong enough to withstand any adverse effect in case interest rates were increased. The Federal Reserve officials have stated that the American economy is now projected to grow between 1.8 percent and 2.0 percent. Federal Reserve also believes that labour hiring in America is also due to improve. Likewise, inflation in the United States would rise so as to get the economy going.
Thus the investors in America and elsewhere in the world remain fearful of the crises engulfing Greece which could force it to exit the Eurozone and the possibility of a rise in American interest rate which two leading financial steps could incite the Federal Reserve to increase the interest rates in America. Some speculators believe that the rise in American interest rates could come in September 2015.
In this connection, Federal Reserve chair Janet Yellen reportedly told journalists at midweek that the American economy is expanding "moderately" and "is on track to grow at a rate of 1.8 to 2.0 percent this year". Though the outgoing quarter (January / March 2015) had suffered due to climatic condition, there is a favourable confidence with the consumers which could hold the American economy positively.
Thus at midweek investors were cautious and prices of stocks dipped in New York ahead of the meeting of the Federal Reserve which could raise interest rates. Similarly, Tokyo scrips also ended lower on Wednesday awaiting the outcome of the US Federal Reserve deliberations and also the meetings of the Japanese central bank. European shares also sagged as per reports received from London fearing worsening of the debt problems of Greece. Britain's top share index FTSE also dipped downwards on Wednesday as the Federal Reserve meeting on Thursday kept investors guessing as to its outcome.
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