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Pakistan uncertain about Indian cotton deals

October 15, 2010

Pakistani traders say any cancellation of Indian contracts or even delays in shipments would spell trouble for the textile industry. — File Photo

ISLAMABAD: Pakistan cotton dealers facing record domestic prices are concerned about deals for nearly one million bales after India stopped registering cotton exports.

Pakistani traders say any cancellation of Indian contracts or even delays in shipments would spell trouble for the textile industry, which accounts for about 60 percent of the country's total exports.

Textile firms in the world's third-largest cotton consumer have looked to neighbouring India, the world's second largest producer, after massive flood damage to the domeestic crop caused an estimated shortfall of about 4 million bales.

Traders had booked about 1 million bales for delivery from November to January from India, industry officials say.

But India this week stopped registering cotton exports applications equal to the stipulated quota of 5.5 million bales, according to a statement on the Indian Textile Commissioner's Web site.

“This has given an excuse to some Indian exporters who say they could not get themselves registered as they were expecting the registration process to go on for a month,” said Naseem Usman, chairman of the Karachi-based Cotton Brokers Forum.

“Now some people are saying that we may get only 25 per cent of the total contracts booked or the shipments may be delayed.” The uncertainty about the Indian deals sent cotton prices soaring in the domestic market.

Usman said domestic prices hit a record high of 7,600 rupees (about $88) per maund (37.32 kg) on Friday.

“Some Indian exporters are saying they want to deliver the orders but are facing difficulties from their government,” said S.M. Imran, a senior textile official whose mill imports Indian cotton.

He said it appeared Indian exporters were looking to escape their contracts and some Karachi-based traders said it was because of rising international cotton prices.

US cotton climbed to a record high in early Asian trade on Friday, climbing to $1.198 per pound, buoyed by a rally in Chinese cotton prices and a wider weakening trend in the US dollar.

“If we don't receive the cotton at this time, prices of cotton will go higher and that will create further problems,” Imran said.

Pakistan in April hoped to produce 14 million bales of cotton in the 2010/11 season, compared with about 12.7 million bales the previous season, when the country had to import about 2 million bales.

Because of August’s floods, government and industry officials now estimate output of about 11.6 million bales of 170 kg (374.8lb) each.