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Crisis-like situation developing in Pakistan textile industry

KARACHI - A crisis-like situation is developing in Pakistan’s textile industry after the recent price flare-up caused by damage to standing crop because of late pest attack and conflicting reports about the production figure.

During last couple of weeks, lint cotton prices have risen to Rs3,162.00 per 40 kg including 15 per cent sales tax from Rs2,762 on reports fuelled by a loud whispering of lower crop estimates,brokers said “spinners could not precisely decide how to react to the new situation and playing cold and hot to outwit ginners and growers,” brokers said.

“The market witnessed a virtual price war between the exporters and the spinners as both tried to grab the floating stock amid fears of further tight conditions,” a leading cotton broker Naseem Usman said.

The big-lot business in the central Sindh lint and at rates well above Rs3,162 reflects that the exporters had already made larger forward export commitments and are out to cover them.

The notable feature was that a Karachi-based ginning factory being fed by phutti (sedcotton) from the lower Sindh cotton belt has made a maiden debut on the processiong front and sold 200 bales at the higher rates.

The world cotton scene is progressively heating up followed by reports of a short crop in China and India and thier big shopping list has sent bullish signals in the cotton trade the world over, he adds.

An other aiding factor was steep increase in prices of New York cotton futures,which had almost stabilised well above the 60-cent per lb mark for the last couple of weeks, allowing the local exporters to swing back into the export business after a lean year. “But things are being pretty difficult for the spinners and the mills as higher lint prices limit their manouvring on the export front as end products don’t show sympathetic rise in the consumer countries,” market sources said.

Owing to massive investment on expansion and modernisation during the last three years and resumption of commercial operations by well over 100 sick units, the intake of the industry has risen to 1.3 million bales but the local production did not match the mill offtake and the gap is being filled through imports, they said.

The local textile industry needs about 1.3 million bales to meet its annual consumption target but according to latest crop projections the total production may not touch the high mark of 11m bales, spinner said.

The big question is how to meet the production gap as import of lint has become too expensive to process it for export markets after the steep rise in world prices.

They said exports should be allowed after the size of the crop is fully known and early season entry of the exporters in the market pushes prices higher, having a negative impact on the export of value-added products. Floor brokers said growers are the chief beneficiary of the current price flare-up as some of them have already sold a substantial quantity at Rs1,160.00 per 40 kg against the official support price of Rs800.