Cotton Weekly Review: Rate jumps on dollar appreciation – Markets
KARACHI: An extraordinary increase in the spot rate of Rs 3,500 per maund has been reported. Ginners and spinners are worried about crop damage from continuous rains. It is estimated that around 60 bales of cotton will need to be imported, but due to the continued rise in the value of the dollar, imports are becoming more expensive. Exports have become difficult due to the recession in international markets.
Due to the terrible financial crisis, there is uncertainty in the market and business circles.
In the local cotton market, there has been a strong upward trend in the price of cotton due to the rising dollar rate over the past week. The rate of Phutti has seen a significant increase from Rs 1000 to 1500 per 40 kg.
In the week after Eidul Adha, trading activity only continued for three days due to rains and the price could not be increased. After Eid, deals were done between Rs 13,000 and Rs 14,500 per maund in Sindh province, while in Punjab province, one or two deals were done between Rs 16,000 and Rs 16,500 per maund. mound.
But after the start of the week under discussion, the price of the dollar continued to rise, under the influence of which the price of cotton also continued to rise. The cotton rate in Sindh is between Rs 16,000 and Rs 16,500 per maund. The cotton rate in Punjab is between Rs 19,000 and 19,500 rupees per maund. The cotton rate in Balochistan is between Rs16,500 and Rs17,000 per maund. The upward trend was observed in the rate of Phutti in three provinces.
Textile mills were facing difficulties due to the rising value of the dollar. For exports, the increase in dollar value is positive, but it is not good for textile and spinning mills because it is difficult for them to buy and store cotton at high prices. Due to increased interest rate, insurance and other expenses, cotton costs about Rs. 300 per maund more per month.
On the other hand, the demand and price of cotton yarn is slow. The situation is such that textile mills buy cotton at high prices and sell cotton yarn at low prices and bear the loss or continue to buy cotton and bear the loss due to less demand for cotton yarn .
How long can such a situation last? Many spinning mills were forcibly operating partially, but in order for the textile mills to continue operating, they had to buy cotton at all costs. Importing cotton is very expensive due to the unusual flight of the dollar. On the other hand, the financial crisis in the market is increasing day by day. In this situation, it becomes difficult for textile factories to make a decision.
On the other hand, due to fluctuations in the price of cotton by thousands of rupees, it also suffers from an uncertain situation, even though many ginners in Sindh province are still in a relatively good position. The arrival of cotton in Punjab is relatively good compared to last year.
The rains still continue. It’s too early to say anything about the harvest, but experts estimate around 90 lake bales will be produced.
Aptma’s chief boss, Gohar Ijaz, said in a statement that this year around 60 million bales will need to be imported from foreign countries to meet the needs of local factories.
The price of cotton in Sindh province is between Rs 16,500 and 17,000 per maund, the price of Phutti per 40 kg is between Rs 5,000 and Rs 6,200. The price of cotton in Punjab is between Rs 19 000 and Rs 19,500 per maund, the price of Phutti is between Rs 65.00 and Rs 8,000 per 40 kg. The price of cotton in Balochistan is between Rs 16500 and 17000 per maund while the price of Phutti is between Rs 6000 and 7000 per 40 kg. The upward trend in Banola and Khal prices was seen in three provinces.
The Karachi Cotton Association Spot Rate Committee increased the spot rate by Rs 3,500 per maund and closed the spot rate at Rs 18,000 per maund.
Karachi Cotton Brokers Forum Chairman Naseem Usman said international cotton markets remained relatively stable after the fluctuations. The New York Cotton Futures Trading rate for December delivery was between 88 US cents and 93 US cents per pound and closed at around 90 US cents.
According to the USDA’s weekly export and sales report, sales for 2021-2022 were 54,100 bales, a significant increase from last week. Vietnam took the lead in purchasing 64,200 bullets. China bought 3100 balls and came second. Indonesia with 2100 balls was in third place.
One lakh 13 thousand 200 bales were sold for the year 2022-23. Vietnam was in the lead with 37,400 bales purchased, Turkey is second with 29,000 bales and Malaysia is third with 9,200 bales purchased.
The country’s textile group exports grew by 25.53% in the last financial period i.e. 2021-22 and remained at $19.329 billion from $15.399 billion in 2020- 21, according to the Pakistan Bureau of Statistics (PBS). Export and import data released by the PBS revealed that in July-June 2021-2022, the country’s total exports remained at $31.792 billion (provisional) compared to $25.304 billion in the corresponding period. from last year, showing an increase of 25.64%.
Exports in June 2022 were $2.918 billion (provisional) compared to $2.626 billion in May 2022, an increase of 11.12% and 6.96% compared to $2,728 million in June 2021. Textile group exports recorded an increase of 3.93% on a monthly basis, reaching $1.706 billion in June 2022, compared to $1.641 billion in May 2022. Textile exports saw a growth of 2.86% on an annual basis and remained at $1.706 billion in June 2022, compared to $1.658 million in June 2021.
Raw cotton exports recorded a growth of 714.94% between July and June 2021-22 and remained at $6.577 million, compared to $0.807 million during the same period last year.
Cotton yarn exports registered a growth of 18.67% in July-June 2021-22 and remained at 1.206 billion dollars against 1.016 billion dollars during the same period last year.
The main export products in June 2022 were knitwear (97,063 million rupees), ready-made garments (75,350 million rupees), bed clothes (58,049 million rupees), fabrics for cotton (41,082 million rupees), other rice (35,268 million rupees), cotton yarn (Rs 19.236 million), towels (Rs 18.643 million), made-up articles (Excl towels & bed linen) (Rs 14.089 million ), basmati rice (Rs 12.838 million) and fruits (Rs 9.699 million).
The oil group’s imports grew by 105.31%, reaching $23.318 billion in July-June 2021-22, compared to $11.357 billion in the same period last year.
Imports of the oil group saw an increase of 146.61%, reaching 3.639 billion dollars in June 2022 against 1.475 billion dollars in June 2021 and recorded a growth of 37.54% compared to 2.645 billion dollars in May 2022 .
The country’s total imports between July and June 2021-2022 totaled $80.177 billion (provisional) compared to $56.380 billion in the corresponding period last year, showing an increase of 42.21%.
Imports in June 2022 were $7.880 billion (provisional) compared to $6.777 billion in May 2022, an increase of 16.28% and 24.06% compared to $6.352 million in June 2021.
The main products imported in June 2022 were petroleum products (Rs 418.314 million), crude oil (Rs 171.423 million), liquefied natural gas (Rs 143.007 million), iron and steel (Rs 66.058 million), materials plastics (Rs 59.821 million), raw cotton (Rs 36,384 million), scrap iron and steel (Rs 31,586 million), palm oil (Rs 29,258 million), motor cars (ckd /skd) (Rs 28,269 million) and electrical machinery and appliances (Rs 25,623 million).
However, Gohar Ejaz, chief sponsor of the All Pakistan Textile Mills Association (APTMA), warned that Pakistan could face a situation similar to that of Sri Lanka if reforms are not made in almost all areas of the industry. ‘economy.
Ejaz said that a default situation will lead to a damaged relationship with investors and have far-reaching consequences. He said that to enable economic stability and sustainable growth, we must carefully examine our policies to identify obstacles and inefficiencies. He was of the view that Pakistan should nurture an export culture and focus on investment, productivity and exports while removing bottlenecks. Historically, we have focused on taxation rather than growth. We must emphasize growth by prioritizing investment, productivity and exports, he said.
Commenting on the energy sector, Ejaz said the energy sector needs reform as mismanagement is rampant. The gas crisis is worsening as international exploration companies have left Pakistan and local businesses are not functioning, leading to a decline in domestic gas production.
In the electricity sector, the distribution companies (DISCO) should be divided into smaller units (at the city level) for better administration and management, he added.
Commenting on exports, he said the ideal way forward is to develop a culture in which all investments and operations are geared towards maximizing exports. The textile sector is the key player as it contributes 62% of all exports and has recorded outstanding performance over the past two years, with textile exports increasing by 43% in FY22 compared to fiscal year 18, he said.
Quoting Western Economist Noble Prize laureate Joseph Stiglitz, he said the laureate had discouraged traditional global economic practices of which Pakistan is also a blind follower. Pakistan raised interest rates from 7 to 15 percent in 6 months, putting a burden on the cash-strapped government, he added.
Ejaz said Pakistan needs a strong export base which serves as a foundation to strengthen the economy without depending on foreign aid. The revenue generated from increased exports can significantly boost the economy, lifting Pakistan out of its current account deficit and economic stagnation. Improving exports is the only solution for a quick recovery from the current economic crisis, he added.
Copyright Business Recorder, 2022