Cotton maintains bullish posture in Pakistan
Pakistan Times Business & Commerce Desk

KARACHI: Though the buyer-seller stand-off continued unabated on Saturday, cotton prices ruled firm.

The trend became more pronounced after the release of PCGA report about cotton arrival during the second fortnight of February.

According to the report, since the inception of the cotton season up to March1, 14.255 million bales of seed cotton reached the ginning factories out of which 14.177 million bales were pressed.

Of this, the TCP lifted 1.614 million bales while private exporters picked up 528,592 bales. Domestic mills bought 11.161 million bales leaving an unsold stock of 872,485 bales with the ginners. The report confirmed the general belief that the total output of cotton would not exceed 14.5 million bales.

The decline in unsold stocks to 8.72 lakh bales indicated that demand-supply imbalance is likely to increase in the coming days thereby triggering price hike.

More so, because the textile mills have to go a long way to cover their forward sales. The industry is experiencing a big surge in exports following the removal of quota restriction and, therefore, the demand for raw cotton is expected to receive a big boost.

According to informed sources, the spinning capacity is consistently increasing. Additional 2 million spindles are understood to be under import in the current year (2004-05) and the coming one. This will raise Pakistan’s consumption of cotton to 16 to 17 million bales very soon.

The continued improvement in yarn and fabric production coupled with enhanced output of value added products in foreign and local markets portends a bullish outlook for cotton prices. Hence experts believe that if reports of incredible growth and development in textile industry prove true, lint prices are bound to harden further.

As the price war between the local spinners and ginners has intensified, the former are reported to be focusing on foreign cotton.

They have already booked nearly a million bales of foreign cotton, particularly long staple fibre to meet the demand for fine and superfine yarn and fabrics.

The apprehension of any unforeseen calamity befalling the forthcoming cotton crop (2005-06) in Pakistan or in any other part of the world which may push up the cotton prices is on the back of current scramble for cotton accumulation.

Meanwhile, the quantum jump in cotton consumption in China, India and Pakistan points to the stable position of cotton prices in coming months. Pakistan is currently in the throes of a virulent inflation. Prices of all goods and services have zoomed up and cotton is no exception. Hence experts rule out the possibility of any decline in cotton prices.

Particularly the quota-free situation after January 1,2005 has engendered bullish sentiments which are likely to intensify after the below expectation phutti arrivals in the second half of last month.

The total arrival of seed cotton since the inception of the season stood at 14.255 million bales during the last fortnight of February as against 14.152 million bales a fortnight ago which means there was an addition of only 0.103 million bales in the last fortnight.

The fast depleting supplies are expected to trigger a bull run leading to an in-fight among the spinners to grab the available supplies.

The final crop situation is likely to emerge after the release of report for cotton arrival in the period ending March 15,2005.

The sharply reduced unsold cotton figure has sent jitters through the spinning circles who are expected to scramble for the available cotton to beef up their inventories.

As the overseas cotton prices have recently taken a downhill course, the leading spinners are reported to have made a beeline for foreign cotton, which is much cheaper than the local one. On Saturday, official spot rate stood unchanged at Rs2325.

Though brokers could not provide any authentic business figure, unconfirmed reports said that around 5000 bales of upper Sindh and South Punjab cotton were sold at Rs 2400/2425.●