KARACHI, Jan 5: Physical business on the cotton market on Monday shrank to modest proportions as both ginners and spinners were busy analysing the impact of lower than market expectations arrivals of phutti in the ginneries on the future price line.

Already the market has absorbed the bullish impact of a five per cent decline in arrivals for the fortnight ended Dec 31, 2003 on the prevailing prices, which had risen by over Rs200 to Rs3,400 per maund without 15 per cent sales tax.

While the ginners are eyeing the already hit all-time peak level of Rs3,600, spinners are planning to forestall fresh price flare-up expected to be fuelled by lower arrival figures.

The prevailing lull in cotton trading in the backdrop of an expected pressure on future supplies forced both the buyers and the sellers to keep to the sidelines at least for the near-term.

Both are taking new year positions according to their own perceptions, indications are that the spinners may remain at the receiving end through the remaining months of the current cotton season, dealers said.

"It could well prove a very difficult year for the textile industry as a whole as higher lint prices could have a negative impact on their export competitiveness," market sources said.

What is more disturbing is that the import are more expensive than the local lint and how to bridge a bid supply gap worried spinners and leading textile mills, they said. New York cotton futures are currently ruling around 75 cents per lb and it is being speculated that they could rise further owing to global shortage of the commodity as compared to consumption needs.

The total arrivals for the current fortnight around 8.4m bales are much lower than the earlier projections and may have an adverse impact on the total crop, which is officially billed around 10m bales.

But the current arrival figures of phutti indicate that the next fortnight could witness much bigger fall in the total crop. "The 9.5m bales figure could be on the higher side if it was achieved as the private surveys hate to go beyond the 9m bales figure," says a leading broker adding "leading spinners also hold the same view."

Official spot rates, however, did not show any change and were firmly held at the last level, although stray business reported in the ready section was done above them.

Ready offtake was light totalling about 5,000 bales, mainly from the southern Punjab ginneries as ginners held on to their positions anticipating further increase in prices.