Slackening demand drives cotton prices down

KARACHI: After having peaked to 11-year high last month, cotton prices started to ratchet down despite shortage of supply in local markets as the demand was slackening with end of buying season, traders said on Saturday.

As cotton season is about to end, cotton spot rate fell Rs300 per maund, according to traders. Very little quantity of the lint was left with the ginners, they said.

Karachi Cotton Association’s committee reduced the spot rate by Rs300 per maund to Rs11,900 per maund.

Prices in the international market also decreased while rates in New York cotton market fluctuated between 84 cents to 95 cents per pound and later closed at 81 cents per pound.

In the local market, prices remained stable despite the fact that ginners were left with a very little stock.

Trade of cotton and yarn has slowed down in Pakistan due to depreciation of the US dollar.

Naseem Usman, chairman of Karachi Cotton Brokers Association said the current season of cotton is about to end while the new season has begun in lower Sindh with partial sowing of cotton. Punjab and Sindh governments are rendering efforts to increase the germination of seeds with better quality seeds.

In Sindh, cotton prices remained Rs10,200 per maund to Rs11,500 per maund. Rates in Punjab stood between Rs10,500 to Rs11,500 per maund. Rates on credit remained at around Rs12,000 per maund.

Cotton production in Pakistan has been recorded at 5.6 million bales only, which was the lowest level in 30 years, against mill consumption of around 15 million bales.

Pakistan would have to import around 8 million bales that would cost around $4 billion to the country when cottonseed, oil and other by-products were included. This would add to the country’s import bill.

Usman said value-added textile sector demanded import of yarn without any custom duty and sales tax. While sales tax was reduced by 5 percent, custom duty remained intact at while 5 percent.

One trader said confrontation on yarn prices between All Pakistan Textile Mills Association and value-added textile sector would come to an end with decline in yarn prices.

The unusual decline in priced was witnessed in the international market because of COVID and fluctuation in dollar rates, said Usman. There were various reasons for decline in cotton prices in the international market, especially due to economic confrontation between China and the US.

Big traders of the US have stopped importing textiles from China. In return, China has also reduced its imports from the US.

Last week, China has cancelled some of its cotton deals from the US, citing higher rates as a reason. According to the United States Department of Agriculture, there was considerable decline in export of the US cotton, which was caused with lack of interest by China – the regular buyer of the US lint.