KARACHI, March 4: Cotton prices on Tuesday rose further as lower than market expectation arrivals of phutti into the ginneries caused panic-like conditions among the spinners and mills.
“Cotton trade is heading for a big crisis of supply and demand, having a terribly negative impact on foreign exchange earnings”, most spinners fear. “An estimated supply gap of about 2 million bales may be pretty difficult to fill-in in the backdrop of world cotton scenario and a record rise in prices”.
Last season mill consumption had touched the all-time high mark of 12.5m bales and indications are that the textile sector may need 1.3m bales as industry has undergone a massive expansion and modernization programme during the year.
“The newly created production capacity may remain idle if the required quantity of lint is not available as the imports have now become more expensive”, spinners said.
New York cotton futures at 58 cents per lb for the ruling May contract has made imports virtually inhibiting at least for the near-term, they added.
The crop may be short of the official target by a half million bales and may not touch the high mark of 10m bales if the current arrival figures are any indications.
“We have been eyeing the total crop figure of 9.8m bales”, says a leading broker Naseem Usman, adding but “the latest figure tells a different story and could cause further increase in prices during the coming weeks”.
According to arrival figures released by the Pakistan Cotton Ginners Association (PCGA) for the fortnight ended Feb 28, the total at 9.636m bales is slightly above the comparable figure of the last year at 9.621m bales, out of which spinners and mills have purchased about 8.3m bales and exporters 0.129m bales.
What worries spinners most are lower unsold stocks of 1.2m bales lying with the ginners as compared to 1.741m bales a year ago, barely enough for spinners consumption, brokers said.
On the export front, exporters have registered export contracts for 3,521 bales with the Export Promotion Bureau, sold to Bangladesh, Indonesia and Japan. The total foreign sales up to March 3 rose to 0.142m bales, according to official figures.
Official spot rates were raised by Rs25 per maund to Rs2,475 excluding 15 per cent sales tax but in the ready section most of the deals were done above them.
Ready business was modest as till late in the evening about 10,000 bales changed hands as under:
SINDH TYPE: 1,200 bales, Moro at Rs2,500, 1,000 bales, Hingorja at Rs2,475, and 1,000 bales, Salehpat at Rs2,500.
PUNJAB VARIETY: 1,000 bales, Rahimyar Khan at Rs2,550 and 2,900 bales, Bahawalpur also at the same rate.