LAHORE, Oct 11: Several spinners intend to import cotton in view of higher prices of local cotton which have risen sharply in the last couple of weeks.
Cotton prices have spiralled in the domestic market because of a sudden surge in the demand (by the local spinners) and New York cotton futures amidst reports of unspecified short crop in China.
“We expect that spinners are going to open LCs for the import of about 100,000 bales by the end of October. The imported cotton would cost about Rs2,700 per maund (37.5kg) as compared to our own local cotton whose price is hovering around Rs3,000 per maund,” an Aptma member said. He said imported cotton also had an additional advantage over local cotton: it contains less moisture and trash.
It is being guessed that the spinners plan to place orders for around 1-1.5 million bales (of 170kg) in the next three months or so in order to stabilize local prices at what they call “rational level” and put an end to the panic that has gripped the market in the last few days.
“The industry won’t remain viable if the price of cotton stays at the current level (of about Rs3,000 per maund) or further jacks up. It will result in bank defaults,” said a miller while talking to this reporter on Saturday. He was of the opinion that the rate must come down to last year’s higher level of Rs2,600 per maund if the industry, especially weaving, was to sustain the pressure and remain viable.
When pointed out that most spinners were in favour of the free market mechanism, he said he did not oppose it. “But we also need to take measures to safeguard our industry. We don’t want growers to lose in the wake of higher international cotton rates. However, it should also be realized that they’re getting almost double the support price of Rs800 per maund fixed by the government. They’re already selling phutti for Rs1300-1400 per maund. They are making money. Why shouldn’t we get the relief just to stay viable,” said the spinner.
It may be recalled that spinners had been opposing fixation of support price for cotton only a couple of years ago when the seed cotton rates depressed to an unusual level. During those days, the spinners purchased lint cotton for as low as Rs1100 per maund and resisted the demand by growers for government intervention in the market mechanics to support the prices to save them from losses.
Several miller contacted by this reporter pleaded that “cotton export should be restricted till as long as actual crop estimates become available to stabilize the market.”
Weavers are most worried because of the increased cotton price as they are getting yarn at a higher rate but are “unable to sell their fabric either in domestic or international market at viable rate.”
“Our situation is pretty much precarious since the US invasion of Iraq. Most weavers have already had large stocks due to suppressed prices in the international market. Now when the time had come to liquidate the stocks at reasonable prices, the yarn rate has gone up by Rs8 per pound in the last two weeks. The current yarn price is not viable for the weavers. Several units may close down if the yarn rates do not come down. Further rise in yarn prices will be undoing of the weaving units,” said a prominent weaver.