20000205

Easier condition on cotton market

DR ZAFAR HASSAN

LAHORE: Easier condition prevailed on the cotton market on Friday ahead of recently announced government decision to observe Saturday as Kashmir Day (Holiday) to express solidarity with the Kashmiri bretheren against the subjugation of India. Thus it would not be before Monday next when the market will seek a new direction. Till then, the spinners have mostly receded to the sidelines over the extended weekend. Most mills adopted a wait-and-see policy on Friday when lint prices suffered a fall of Rs 25 to Rs 50 per maund (37.32 kgs) in all varieties.

The Karachi Cotton Association (KCA) also recorded the weak sentiment in the market by registering lower spot rates in all the notified varieties on Friday. Thus the spot rate for Niab-78 was fixed lower at Rs 1,920.25 per maund (37.32 kgs) including the 15 percent sales tax (down by Rs 17.25 per maund), that for K-68 was decreased to Rs 2,196.25 per maund (down by Rs 28.75 per maund), while the spot rate for MNH-93 was reduced to Rs 2,235 per maund (down by Rs 28.75 per maund). The mills remained indifferent buyers in a market appearing to be weak.

Trading in ready cotton appeared to be at a low EBB on Friday. Without the 15 percent sales tax, the price for lint from Mirpurkhas in Sindh appeared to range from Rs 1,550 to Rs 1,600 per maund (37.32 kgs), that in Shahdadpur or Sanghar from Rs 1,600 to Rs 1,625 per maund; in Nawabshah from Rs 1,650 to Rs 1,700 per maund, while in Khairpur district it was said to range from Rs 1,700 to Rs 1,750 per maund. However, according to unverified information, 2,500 bales of cotton from Moro, Kot Diji and Bhiria Road reportedly sold at Rs 1,700 per maund, while the price for upper Sindh cotton (K-68) was said to have ranged from Rs 1,850 to Rs 1,900 per maund.

Without the sales tax, the price for cotton in Punjab is said to have ranged from Rs 1,700 to Rs 1,925 per maund (37.32 kgs), while a solid sale of 10,000 bales of cotton from Sadiqabad was reported at Rs 1,925 per maund. The price of seedcotton (Kapas/Phutti) in Sindh reportedly ranged from Rs 700 to Rs 900 per 40 kgs. While in Punjab it said to have ranged from Rs 750 to Rs 925 per 40 kgs. In the evening also quieter conditions prevailed as the spinners would remain busy for several days to lift their earlier purchases of cotton.

There were also reports in the market that due to the stupendous rise in lint prices in recent weeks, several exporters may not be able to fulfil their obligations against foreign sales. Trade circles again stressed the resumption of a cotton futures market to stabilise and normalise the cotton trade against heavy fluctuation in prices and also to enable the exporters to hedge their sales.

The Trading Corporation of Pakistan (TCP) has apparently decided to unload its stock of nearly half a million bales (170 kgs) of cotton in the export market through open auction in which the foreign merchants are participating. Unless this large inventory of cotton being carried by the TCP is disposed expeditiously, it could lose its advantageous position. At present the TCP is emerging as a profitable organisation, but due to any possible delay or adverse market position it could run into a hazardous situation.

The TCP sold no cotton in its first tender due to the low prices it had received. Even in the second tender, it only sold 910 bales. In the third tender opened during this week, the TCP recieved bids for nearly 300,000 bales (170 kgs) of cotton against an offer of only 40,000 bales. Only 13,000 bales fo type Afzal and 10,000 bales of type Alaka were sold to the highest bidders at prices of 41.55 and 41 US cents per pound respectively on fob Karachi basis. There will be another offer for cotton from the TCP next week, which may fetch better prices as local lint prices have gone up significantly in recent weeks.

As expected, the Pakistan Cotton Ginner's Association (PCGA) issued a satisfactory report of seedcotton arrivals for the current (1999-2000) season till the first of February 2000, showing a national total of 9,244,785 lint-equivalent bales (170 kgs), an increase of 35.23 percent against last year. Punjab has produced 7,232,143 bales, an increase of 37.23 percent over last year's 5,270,055 bales, while Sindh has delivered 2,012,642 bales, an increase of 28.49 percent over last years's 1,566,378 bales. Some sections of the trade were looking for higher arrivals of seedcotton. Anyhow, a total of ten million bales fo cotton production in Pakistan still remains possible this year on an ex-gin basis.

Some exporters are complaining that their cotton shipments are being hindered as the Customs demand classification on the basis of the grades evolved by the Pakistan Cotton Standards Institute instead of the prevalent CEC types, which are more in vogue. Cotton is thus said to be held up which is otherwise ready for shipment. Exporters want extension of CEC types for shipment purposes for at least another year.

Complaints are being received regularly from the textile ancillary industry that the domestic yarn prices have shot up and are too high to be remunerative for the weaving, garment and the made-up sectors. They are calling for check on increase in yarn prices to keep the downstream textile industry viable.

Local lint values are being influenced by the weakness on the New York futures market. On last Thursday, the March 2000 delivery month closed lower at 56.09 cents per pound, (down by 95 points), the May 2000 delivery ended the session at 57.72 cents per pound (down by 79 points), while the July 2000 delivery settled at 58.84 cents per pound (down by 66 points). The current easier tone in New York follows bustling activity over the previous weeks. Relative easiness is also being attributed to the incoming lunar new year, which could diminish demand in the Far East.