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Cotton market may maintain its bullish trend after a respite

S A AZIZ SHAH

KARACHI: Now most of the cotton players are now agree that ex-gin production may be below 10 million bales around 9.8 million bales. Exports and imports of cotton are going simultaneously. About 204,000 bales (equivalent to 261,120 Pak bales) have already imported and further 100,000 bales is likely to imported during this season. The actual shipments during this season have reached only 181,000 bales. What would be the total shipments during the season cannot be said but estimates vary between 700,000 and 900,000 bales.

Prospects for higher domestic consumption are there and reliable circles estimate it around 9.2 million bales. The local cotton statistical position is expected to remain tight and so the local prices barring some reactions. Yarn prices in the local market are high in view of tight supply position. The council of textile associations has asked the government to restrict export of yarn to 15,000 tonnes per month and 10 percent export duty to make yarn available in the local market for weaving industry.

The Government Bureau of Statistics show an increase of 21.41 percent in the export of yarn during last eight months of this financial year. The direction of exports in case of yarn are changing from East to West.

Our yarn exports in Japan is decreasing but is increasing in the US. In the month of January, Pakistan was the largest exporter of carded yarn while second in combed yarn to the US. Exports of carded yarn in January, 2000 are 124 percent more than the exports in January 99.

This explosion in yarn exports clearly explains the reason for increase in domestic cotton consumption which may go even beyond 9.2 million bales. Turkey's domestic consumption is increasing fast due to its larger exports of textile apparels. Turkey can export yarn, textile and apparels made only from domestic cotton. Turkey is also importing cotton for manufacturing yarn, textile and apparels for domestic use. Turkey's exports for these items to the US has increased 43 percent in January 2000 as compared with January 99.

Actually imports of yarn, textile and apparels to the US have substantially increased from many European countries. Global demand for yarn, textile and apparels has increased.

This season, global cotton consumption will be higher than its production. Total domestic cotton consumption in India is expected to increase from 163.36 million bales (170 kg each) in 1998-99 to 171 million bales. Indian interests in imported cotton has been renewed for nearby to January 2001 shipments.

Local cotton market is reported steady. Prices for the Punjab style are ruling around Rs 2,050-2,150, upper Sindh Rs 1,950-2,050 and lower Sindh Rs 1,850-1,950. The rising market is taking some respite. The ginners are firm on the prices as they expect the national unsold stocks below 800,000 bales. New cotton crop can be expected only in August. Hence complete four months are to go for new crop arrivals.

The Trading Corporation of Pakistan (TCP) have so far confirmed sale of 176,910 bales in exports through open tenders. The sixth sale tender for 50,000 bales will be opened on 30th instant. Trade circles expect best rate around Rs 45.

In the last two tenders, TCP could sale 10,000 bales per tender. With this speed, TCP would require at least more than 15 months to complete the sale of balance 350,000 bales.

One textile group has also given bid for the purchase of 40,000 bales at Rs 1,975 per maund ex-TCP store. Disposal through export is likely to be delayed so the option of selling some cotton to the local spinners should also be examined objectively.

L/Cs for more than 125,000 bales are reported to have been received but actual shipment of about 2,300 bales have been made. Shipments are getting delayed for one or the other reason and TCP is now asking the importers for extension in L/Cs.

The importers want their shipments as per schedule but delay in physical handling of cotton bales in stores and documentation work in the head office should be done on top priority. There is delay in communication between head office and TCP stores. Shipping instructions and other documents received from the foreign buyers are required to be passed on to the stores immediately for their necessary action and weight-notes and other documents prepared at store are to be sent to the head office for their further necessary action.

The process of transfer of documents from the head office to stores and vice-versa get delayed. To speed up this work, TCP should install one fax machine at TCP Korangi Store for transmission of necessary documents.

The TCP officers should comprehend the gravity of the situation and take all necessary steps to meet the shipment schedules. All officers concerned with the export business should have familiarity with the export procedure and should have flow-chart of the sequence of all the activities of export business right from signing the export contact to negotiation of documents, realisation and crediting the proceed of L/C.

The international market has already shown signs of weakness. The TCP should streamline the shipment and documentation procedure and work on war-footings to complete the work within scheduled period.