Ample availability of domestic cotton, poor condition of yarn prices, downturn in global commodity prices including cotton and weakening economic growth in many parts of the world have all bunched together to depress fibre prices. In Pakistan, prospects of better cotton output than originally anticipated have also contributed to an easy outlook for cotton prices. Since nearly one week, cotton prices in our market have mostly remained range bound.
According to Karachi brokers, seed cotton (Kapas/Phutti) prices in Sindh reportedly ranged from Rs 1800 to Rs 2550 per 40 Kgs, according to the quality.
Seed cotton prices in Punjab were said to have ranged from Rs 2500 to Rs 2700 per 40 Kgs in a generally weak market. However, there were some buyers for good quality seed cotton where prices also improved.
Lint prices in Sindh were said to have ranged from Rs 4200 to Rs 5050 per maund (37.32 Kgs), according to the quality. In the Punjab, lint prices are said to have ranged from Rs 5150 to Rs 5250 per maund, as per quality. Arrivals of seed cotton up to the 15th of November, 2014 for the current crop (August 2014 / July 2015) are being estimated at about 11 million bales (155 Kgs). This season the total crop could range from 14.5 million to 15 million domestic size bales on an ex-gin basis if the current arrivals rate of seed cotton maintains its pace. Synthetic fibre producing factories like those producing polyester fibres are said to be running below capacity.
Buying by the domestic textile mills is reported to be on a selective basis. There is also reported to be a financial crunch in the market. The Pakistan rupee is reportedly improving against the greenback. The Trading Corporation of Pakistan (TCP) has reportedly contracted to buy 225,000 bales of cotton from the current crop (2014/2015) from the ginners till now. No notable rise in cotton prices has been reported till now but slide in cotton prices has stopped for the time being.
Many spinners and producers of value added textile goods manufacturers met in Faisalabad recently and severely criticised the government plan to cut gas supplies to the textile and its downstream industries. The textile associations are reported to have rejected the four months long gas closure plan to the textile related industries and called for a reversal of the decision within a couple of days.
It is feared that the four-month long closure of gas supply could hit the ten million labourers working in textile and allied units as many manufacturing units could shut down due to lack of gas supply forcing the mills to lay off the workers. On the global economic and financial front, the news snatching the headlines continued to include the weak condition of the Eurozone economy, the slowing down of the Chinese economy, the continuing fall in commodity prices and the recent formation of the Asian Infrastructure Investment Bank (AIIB). Of course the fear and spread of the Ebola virus continues to haunt the world as it is already hurting the development of the global economy.
According to current indications, the weakening of the growth potential in the Eurozone is likely to remain and the third quarter performance in the Eurozone is unlikely to make any notable gains from the second quarter of 2014 when the economy reportedly remained close to stagnation.
Generally speaking, during October 2014, any economic gain in the Eurozone was marginal and economists remain mostly hopeless that any significant progress will be made in the Eurozone during 2014.
The trouble is that the health of the American economy is presently irretrievably tied to the economic fortunes of the Eurozone.
Fears have been expressed that slowing down of manufacturing in China which has frightened many observers around the globe because a Chinese slowdown will sizably reduce the demand for raw materials and commodities which are bound to impede any growth in the global economy. In fact, some economists also believe that the Chinese economy may have started contracting. There are also reports that over capacity problem in the infrastructure sector in China has created an imbalance in the Chinese economy which needs a correction.
With the interest rates going up in America following the withdrawal of cheap dollars floating around the world, there could be a paucity of credit in several of the emerging economies.
Countries which have been cited which could suffer due to outflow of dollars following the withdrawal of Quantitative Easing (QE3) in America include Brazil, Russia, South Africa and possibly India.
While many of the poor countries which import different commodities may gain from cheaper prices, the countries producing and exporting the commodities may suffer a sharp decline in their income and foreign exchange earnings. Various commodities which are sold or exported globally include crude oil, tea, cotton, coffee, silver, gold, copper, zinc, cattle, gas and several others.
Last month the Chinese government took the initiative, assisted in all by 21 countries including China, to form the Asian Infrastructure Investment Bank (AIIB) which has been proposed to lend money to poorer countries to build roads, railway tracks, dams, mobile phone towers and airports and the likes thereof. Led by China, the proposal is expected to launch business by the end of next year. This venture could assist in the manufacturing and trading of goods and commodities in the regions which are short of these facilities and in the process assist in creating more balanced global functioning of economic activity.
