Market Report – Pakistan 22nd April 2019

Local Cotton Highlights:

• Last week, modest trading activity was seen in the local cotton market. Sustained demand pushed rates slightly on the higher side. Current scenario is an encouragement for the textile sector to keep buying fine quality, the mills are still facing shortage problem, import will keep a balance between demand and supply. The ginners have very little stock of cotton and quality is not so bad, this is a solid factor behind the strong demand. They are expecting more profits in days to come. Ginners have only six lac bales of cotton, so they are trying to gain profit as much as they can.
• The Karachi Cotton Association (KCA) was stable at Rs 8800 per maund. It seems that prices may go up slightly due to less stock left and expectation of late arrival of new crop.
• In the international cotton market, mixed trend was seen in the prices of cotton. Cotton Association of India said that the production of cotton in India will be 3 crore 21 lac bales which is 44 lack bales less than the initial estimate of 3 crore 65 lac bales. More over China announced the quota of importing 800,000-ton bales of cotton which is equal to 47 lac bales of 170 kg due to which it is expected that prices of cotton in international market will increase.
• The PCGA issued cotton arrivals figure across country till April 15, showing that seed cotton (Phutti) equivalent to 10.775 million bales have reached ginneries showing a shortfall by 6.94 percent compared to corresponding period of the last year. Out of total arrivals, over 10.773 million bales have undergone the ginning process. During the current season estimated crop of cotton will be 10.08 million bales as compared to the last year production of 11.6 million bales. The relevant departments were active to achieve the target of production of 15 million bales set by Prime Minister Imran Khan for the year 2019-20.
• It was decided by government that 20 cotton factories in Punjab and Sindh will be selected which will give Rs 200 per 40 Kg premium on Contamination Free Cotton. The farmers of these will be directed that they will give clean Contamination Free Cotton to these selected factories. The ginners will make cotton bales from this cotton and the textile and spinning mills as well as private exporters of cotton will pay the premium accordingly.
• According to the information Federal Committee on Agriculture (FCA) set a cotton production target of 15 million bales for the year 2019-20. The cotton will be sowed on an area of 2.895 million hectares. It is hoped that sufficient amount of water will be available for the crop. Last year FAC has set the initial target of production to one crore 43 lac 70 thousand bales for which 2.955 hectares (73 lac acres) was allocated but due to intense shortage of water sowing process was completed on 2.406 hectares (60 lac acres) due to which only one crore 8 lac cotton bales were produced. In the year 2017-18 one crore 16 lac bales of cotton were produced for which government had allocated 2.700 hectares (67 lac acres) for cotton sowing.
• Prices of seed cotton (Kapas/Phutti) in Sindh were in range from Rs 3000 to Rs 3500 per 40 Kgs, while in the Punjab the seed cotton prices reportedly ranged from Rs 3000 to Rs 3500 per 40 Kgs in local market based on quality, which is available in small quantity. Prices of lint for the crop (2018/2019) from Sindh was in range from Rs 7700 to Rs 9000 per maund (37.32 Kgs), while the lint prices from Punjab reportedly ranged from Rs 7800 to Rs 9100 per maund. Overall deals were made between the range of USC 66~78 Lbs. (7,700~9,100/ maund).

New York Cotton Futures:

• New York Cotton futures opened with lower level on Monday as compare to previous week’s closing figures.
• NYCF showed upward trend in next days, while closed on negative side before good Friday holiday. hence, closed on positive side by the end of the week.

At last day of the week, MAY 2019 closed at 77.31 with increase of 82 points.

At last day of the week, JULY 2019 closed at 78.27 with rose of 123 points.

At last day of the week, OCT 2019 closed at 77.23 with upsurge of 114 points.

Liverpool Index:

A was opened at 86.70 with lower level from previous week’s closing figure.

• In this week Index “A” showed mix trend and moved both side steady to upward, at the end closed on positive side.
• At last day of the week, LPI “A” closed at 87.75 with increase of 105 point as of opening figure of the week.

Crude Oil:

Crude Oil prices opened at USD 63.40 with lower level as compared to last week closing figures.

• In this week crude oil price moved on both side with mix trend and closed on positive side at the end of week.
• In last day of the week, Crude Oil price closed at USD 64.00 with increased of USD 0.60 cents as of opening figure of week.

Pakistan Currency Exchange Rates

• In last week values of Pak rupee was stable against US Dollar’s, other major currencies showed mix trend in both Interbank and open markets.
• At the end of week, Euro closed on a negative note with figure of 1.12 and British Pound also closed on negative note with figure 1.30 against USD.

Local Yarn:

• Local Yarn Market remained stable in terms of asking and average in term of business finalization by end of last week. Prices already touched maximum level and activity became slow on these prices level. All mills are interested to work on these price levels as no one is carrying stock but want to book forward sale. On the other hand, weavers showed some interest and booked their urgently needed yarns.
• PSF price remained stable during this week ended in domestic market. PTA, MEG and Crude oil prices gradually increased from last two weeks. Import price for fiber remained slow during this week and it is expected that local fiber price will remains stable in upcoming weeks.
• Faisalabad trading market reported good business activity. Prices remained firm to make good activity in staple and fine count yarns. PC/CVC yarn activity reported average during this week with stable prices.

Following are current asking prices of yarn in local market based on ex mills:

Export Yarn:

 China:

• Chinese customer remained active for another week in a row and kept on floating handsome numbers of enquiries. However, business confirmation remained nominal as prices from Pakistan have been increased sharply. After good business activity in domestic as well as international markets, suppliers have increased their prices by 4-5%. Although customers are interested to place orders but such hike by spinners is not at all acceptable. Hence, business activity is limited as customers are resisting against prices.
• It is expected that price will remain firm and stable with slight tendency to increase further. However, market direction will be determined on the basis of demand and supply only.

Other Markets:

• Insignificant activity has been noticed in Export Yarn Market. Prices remained stable and spinners prefer to sell in domestic markets as they were getting better prices. In Far Eastern market, Korean customers remained quiet with no major activity. Few inquiries of specialized yarns like Mélanges and zero twist were reported without reasonable business. Limited inquiries were received from Vietnam and Indonesia mainly for the specialized yarns. It is expected that business will materialize in next couple of weeks. As far as Hong Kong market is concerned, customers placed few limited inquires but no deal was finalized.
• European Market remained inactive and floated limited number of inquiries during the start of previous week. However, only few deals were reported since Holiday mode was on from the middle of the week. Only those deals were confirmed where customers found prices as per their desire which was difficult in current upward trend. So, overall, nominal activity was reported.
• Turkish customers also inquired for limited quantities but unable to work on improved prices. Business from Bangladesh was also very slow.

Local Fabric:

• In current week under review the local fabric market remained in green zone. Market showed firm, stable and cemented their last gains for both narrow and wider width fabric markets. Buyers floated limited inquiries and weavers also got confirmation of negligible orders due to very cautious behavior of buyers.
• Currently major weavers are booked till early June for narrow width and end June~early July’19 for wider width and offering onward deliveries.

Local fabric prices of regular items are as follows:

20×16/128×60=63”at USD 1.18 to 1.20 per yard, 16×12/108×56=63” in range of USD 1.27 to 1.29 per yard and 20×20/108×58=63” was sold in range of USD 0.99 to 1.01 per yard based on ex mills.

Export Fabric:

• Mixed trading activity was observed in Far Eastern markets during the week under review. Limited number of inquiries were received from Korean, China and Japan. Sri Lanka, Vietnam, Bangladesh and Thailand markets remained aside of buying. Customers have absorbed 2~3% prices against 7~8% jump due to hike in yarn prices.
• Currently good suppliers are booked till end of May and offering early ~ mid-May onward deliveries whereas average suppliers are booked till 3^rd week of May and offering end May onward deliveries. It is expected that prices will remain stable in firm in coming days however business activity may remain slow.

Following were the closing rates based on CNF Far Eastern ports.

20×16/128×60=63”, in range of 1.22 to 1.24 per yd, 16×12/108×56=63” between USD 1.32 to 1.34 per yd and 20×20/108×5863” in range of USD 1.04 to 1.06 per yd based on CNF Far Eastern ports.

• Average number of inquiries were received from European customers thus limited buying was noticed both in narrow and wider width fabric. USA market was little bit active hence they have placed good number of quantity orders in T-180 ~ T300. Wider width suppliers have more comfortable position as compared to narrow width because they are booked till end of July and offering early Aug onward deliveries. It is expected that wider width fabric business will remain good in future however prices may remain firm.

Home Textiles:

• Home textile business activity was firm in last week. Customer floated inquiries in the market & maturity of business was slightly better as compared to the last week.
• USA Market was activate & a lot of inquiries were floated in the market. Customers placed good orders because suppliers offered good prices to capture the orders. European markets were also firm & customer placed orders which they required on urgent basis.
• Prices were also firm in last week because yarn prices remained stable in the last week after a major hike. Due to yarn prices stability suppliers are offering good prices. Suppliers have orders up to May, 2019 but suppliers are still under sales pressure to fulfill their capacities at 100%. As far as shipments are concerned supplier is offering 65 to 70 days for new orders & for repeat orders supplier are offering 50 to 65 days.

Garments:

• In the recent era, the term competitiveness has become a very hot issue in the world. Pakistani garment factories have found out the dynamics of competitive advantages and utilizing them effectively to get the best business volumes in the global markets.
• So far, the Pakistani garment industry is performing well in all the concerned areas; however, at the same time there are some areas to develop the garment industry at local and in global markets. Pakistan has enormous labour force resources availability; on the other hand, there are some unskilled and semi-skilled labours. But still the labour cost is inexpensive than other countries, so these factors are supportive to become competitive in the foreign markets.
• There are good communication and transportation infrastructure to facilitate the garment industry of Pakistan. For communication, modern and up-to-date technology is available to contact the customers in different regions of the world and cheap communication reduces the production cost. Apparel manufacturers are keen to develop and explore the garments business by using various strategies according to the competition situations in domestic and global markets. Prices are viable at the moment with sixty to ninety days lead time.

Going Forward:

• In Local Yarn Market it is expected that market will be remain stable for this week as mills are in comfortable sales zone and will resist on these asking levels. Further price trends of yarn will be according to demand and supply of different counts which will lead price level.
• In Export Yarn China Market, cotton prices all over the origins are also under upward tone and we might see the same sentiment till the start of new crop. In Other markets business activity remained slow. European buyers were seeking better prices, as working on current price levels seem difficult. It is expected that yarn business will remain slow in upcoming week. However, prices will remain stable.
• In Local Fabric Market it’s very hard to beat prevailing bullish and firm sentiments in the local fabric market for coming weeks.
• In Export Fabric Market slow business sentiment was observed from Far Eastern markets. Prices remained stable and firm however customers have absorbed 2~3% increase against 7~8% hike of prices. European markets were low but USA market was active and expected to remain good in coming days as well.
• The Home Textiles Market was good last week and in the coming days it looks as if the situation will further improve, and hopefully Customer will place good orders in the upcoming weeks.
• The Garment Industry is varied and much diversified. Pakistani garments industry has the capability to offer an extensive range of garments with massive volume for exports to different world markets.