KARACHI, March 6: Active trading was again witnessed on the cotton market on Wednesday as spinners continued to cover their forward positions, fearing an imminent price flare-up.
About 10,000 bales changed hands as a leading group of spinners was not inclined to take a technical breather owing to strong presence of the TCP.
“The market is still far away from limits of price war, but it may eventually be heading for a big show down between the spinner and the TCP in the coming weeks,” predicts a cotton broker, basing his perception on the changed world textile outlook in the Western world after the Afghan war.
The increase in quota by the US and the European Union in addition to tariff cuts ensure a steady outflow of textiles in the next couple of months and keeping that perception in mind spinners are back in the market.
Although TCP purchasing rates are still higher by Rs155 per maund than that of prevailing open market rates at which physical business is being transacted, spinners fear the gap may be bridged if they go all out for the unsold stock lying with the ginners.
As a result, spinners are facing the dilemma of keeping prices within the prevailing levels and making up their short positions, without allowing any big rise at least for the near-term and that is perhaps why they mostly extend guarded support.
But cotton analysts claim the status quo may not be maintained during the next couple of weeks as the manoeuvring leverage of spinners may now have no relevance to the changed scenario. The TCP is there to fill in the gap if any, they added.
They said the last quarter of the current fiscal could witness a big boost in textile exports to the US and the EU irrespective of corresponding increase in exportable surpluses and that would push price of lint and cotton yarn further higher.
It was perhaps in this background that official spot rates were further consolidated in line with physical trading.
Ready offtake was comparatively large at about 10,000 bales, the highest quoted was Rs1,700 per maund without 15 per cent sales tax depending on quality and staple length of the lint in trade. The following are some of the deals, which gone through late on Wednesday evening:
SINDH TYPE: 200 bales of Mirpurkhas at Rs1,375 and 800 bales of Khairpur at Rs1,600.
PUNJAB VARIETY: 3,500 bales of Bahawalpur at Rs1,700, 600 bales at Rs1,575, 1,000 bales, Ahmedpur East at Rs1,700, 1,000 bales, Rahimyar Khan at Rs1,700, 400 bales, at Rs1,685, 300 bales, at Rs1,610 and 800 bales of Rajanpur at Rs1,695.