Market Report – Pakistan 17th June 2019

Local Cotton Highlights:

• Last week, less activity was seen as few buyers purchased lint. Overall trading volume has been low because of Eid Holidays. Kind of uncertainty prevailed in the market as govt is planning to impose sales tax due to which Industries and trading sectors were protesting. But it doesn’t seem like the government will take back its decision.
• The ginners were firm with 2.5~3 lakh bales on same prices and expecting good margins in coming days due to the late arrival of new crop and sharp increase in US$ verses of PAK Rupee as imported cotton will not be feasible for buyers.
• The Karachi Cotton Association (KCA) spot rate closed Rs 8800 per maund with same level without any changes.
• The price of cotton international market was almost firm, NYCF and China market showed mix trend whereas on the other hand Indian cotton showed firmness and slight upward trend.
• The partial arrival of cotton for the new season of 2019-20 has been begun in the other lower region of Sindh (Southern Province of Pakistan). After the of arrival of Phutti the activity of ginning begun in many factories.
• According to the estimates of Pakistan Cotton Ginners Association, the production of cotton in the country till May 1 2019 will be 1 crore 8 lac bales which is less than seven percent as compared to last year. While FAC has set the target of production to 1 crore 50 lac bales for the year 2019-20 and the Senate Committee has set the target of 1 crore 52 lac bales from 3.28 million hectares. Although it looks as if these estimates will not meet the ground realities. However, the reports from lower areas of Sindh have given satisfaction of cotton sowing. The problem is in Punjab where the reports of cotton sowing are not so satisfactory as of now.
• Government has imposed 10 percent sales tax on cotton and 17 percent sales tax on cotton yarn. While the government is planning to take back the incentives given to five zero rated export-oriented industries which underperformed despite the benefits given. The government says that their put did increase 20% but in terms value there was significant increase, this will lead towards them imposing 17 percent sales tax once the announced budget gets passed in the upper house. This will be applicable for all of the textile sector.
• The exporters were agitating against governments anti industry trust and they are calling for strike. But generally, these moves are not going effect much because the genuine exporters know that these measures are being taken for keeping the economy well documented and exporters will enjoy a rebate on the 17%, they have paid for.
• According to the report of Cotton Association of India as compared to initial estimates of production of 3 crore 65 lac bales only 3 crore 10 to 15 lac bales will be produced which is 45 lacs less than the initial estimate which has led towards India importing a handsome amount of cotton from USA.
• Prices of seed cotton (Kapas/Phutti) for the new crop(2019-2020) in Sindh were in range from Rs 3900 to Rs 4000 per 40 Kgs. 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 9000 per maund. Overall deals were made between the range of USC 64~74 Lbs. (7,700~9,000/ maund).

New York Cotton Futures:

• New York Cotton futures opened slightly higher level on Monday as compare to previous week’s closing figures.
• NYCF showed mix trend in this week and closed on positive side by the end of the week.

At last day of the week, JULY 2019 closed at 65.94 with decrease of 05 points.

At last day of the week, OCT 2019 closed at 66.61 with increase of 74 points.

At last day of the week, DEC 2019 closed at 67.07 with upsurge of 18 points.

Liverpool Index:

A was opened at 79.35 with same level from previous week’s closing figure.

• In this week Index “A” showed mix trend in this week and at the end closed on negative side.
• At last day of the week, LPI “A” closed at 77.50 with decrease of 185 points as of opening figure of the week.

Crude Oil:

Crude Oil prices opened at USD 53.26 with low level as compared to last week closing figures.

• In this week, crude oil prices showed downward trend in whole week and closed on negative side at the end of week.
• In last day of the week, Crude Oil price closed at USD 52.51 with decreased of USD 0.75 cents as of opening figure of week.

Pakistan Currency Exchange Rates

• In last week values of Pak rupee deprecated sharply 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 1.26 against USD.

Local Yarn:

• Local yarn market prices remained under sale pressure from the start of this week and jumped up after Rupee devaluation against US$ by last week ended. Some of buyers covered yarn for their pending/running orders or for their urgent need only. Due to 17% GST imposed in Federal Budget, most of weavers/finishers were trying to build inventory at their end before 30^th
• PSF price remained stable during this week ended in domestic market. Import polyester fiber dropped in Import and compensated by devaluation which cause price stability. PTA, MEG and Crude oil prices was decline in international market. Now price of fiber expected to remains same for next week.
• Faisalabad trading market reported slow business activity. Most of trader was covered till 30^th June and was busy in lifting and to build stock to avoid 17% GST imposed in Federal Govt. Budget. Prices jumped up only before 30^th June sales.

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

Export Yarn:

• Market remained dull and slow. Customers remained on side line due to uncertain market conditions in China as well as in Pakistan. Major reason was depreciation of Chinese currency which is keeping customers away from future buying on fear of further loss in the coming days.
• US – China trade war is still unresolved and it is expected that thigs will not get settled in the near new future. We might see things moving in same direction with sluggish business activity in days to come.
• Suppliers are under pressure due to non-opening of LCs. On top of that, due to financial year closing in June, suppliers have to dispatch the stocks which have put them under difficult situation and they are trying to sell even at lower levels to get LCs.
• European customers remained under nominal business activity. Although good level of enquiries was floated but business materialization remained dull due to gap between asking and bid prices. However, we might see some order placements in next week only where suppliers will match customer desired price levels. HK customers remained on side line and no such enquiries were received. Bangladesh customers were silent as well and no such business was materialized.

Local Fabric:

• After Eid holidays uncertainty gripped the local market due to currency devaluation and thus local fabric market entered into negative territory. Slow sentiments reported in the market throughout the week for both narrow and wider width fabric markets.
• Flow of inquiries remained limited and resultantly weavers booked limited orders after tough negotiations. Major weavers are offering 3^rd week July ~ end July onward deliveries for narrow width and end July onward for wider width looms. However special looms deliveries are available for End August / September.

Local fabric prices of regular items are as follows:

20×16/128×60=63”at USD 1.09 to 1.11 per yard, 16×12/108×56=63” in range of USD 1.18 to 1.20 per yard and 20×20/108×58=63” was sold in range of USD 0.92 to 0.94 per yard based on ex mills.

Export Fabric:

• Fare eastern markets remained mixed as some of the customers conducted limited bookings with their selective suppliers. Korean customers bought limited quantities whereas Chinse customers were aside of buying during the whole week.
• Good inquiries were reported from Bangladesh but orders materialization did not take place. Japan, Vietnam, Indonesia, Thailand and Sri Lankan markets remained mixed with limited number of inquiries resultant limited buying.
• Prices remained stable despite a slight increase in yarn prices because of the currency devaluation against USD of the Polyester fiber which gets imported. Currently good suppliers are booked till end of July whereas average suppliers are booked till mid of June and offering onward deliveries. Slow market activity is forecasted for coming days and prices may remain stable.

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

20×16/128×60=63”, in range of 1.12 to 1.14 per yd, 16×12/108×56=63” between USD 1.21 to 1.23 per yd and 20×20/108×5863” in range of USD 0.93 to 0.95 per yd based on CNF Far Eastern ports.

• European markets also remained mixed as limited inquiries were received mainly from Germany, Italy and Portugal. Other European sectors were almost quite during the week.
• Wider width suppliers could not extend their buying as no considerable inquiries were noticed. Suppliers for wider width are booked till mid of Aug and offering end Aug onward deliveries. Their prices were stable without any major change. It is expected that wider width business may remain slow in coming days due to lean season. USA market was slow with limited number of inquiries resultant no considerable buying from USA buyers.

Home Textiles:

• Home textile market business activity improved during last week. Customers floated goods inquiries in the market & maturity of business was also seen. USA Market, customers were floated good  inquiries and business maturity was good in terms of order placement.
• European markets placed good orders, especially the UK market where orders placed belonged to the winter/Christmas sales.
• Prices were slightly decreased in last week. And due to the devaluation of Pakistani currency price trend was on the downward side. Yarn prices also decreased which directly affected the cost of finished products and almost 2 to 3% decrease has been experienced in the last week.
• As far as shipments are concerned suppliers are offering 65 to 70 days for new orders & for repeat orders supplier are offering 50 to 60 days.

Garments:

• A series of new finishing processes have been incorporated with improved shades, texture and lustre. Some of the bulk export items, which have gained popularity, are 100% cotton T-shirts, vests, slips, children’s pyjama suits, sports shirts, undergarments, bathing suits, knitted garments and knitted tabular or flat fabrics.
• The fashion and apparel industry in Pakistan is experiencing accelerated growth. In recent years, the apparel sector has witnessed entry of some of the biggest textile groups of the country with their own brand names. Plus, the talented designs are projecting the cultural heritage of Pakistan.
• Pakistan being a manufacturing facility to many world-renowned brands and moving consistently towards digitalization through e-commerce, e-business and virtual business, which enables a direct link to global market which operates in the age of digital presence. In view of the current trade issues between USA and China there are chances that orders will move towards Pakistan, with Chinese factories relocating within Pakistan, a move which has already started seeing its effects.
• Factories are focusing to meet the shipment deadlines as post Eid holidays workers’ attendance is not in full swing. For the new inquiries lead time is being asked from sixty to eighty days for basic articles and for fashioned articles it is from eighty to hundred days depending upon the type of embellishment.

Going Forward:

• In Local Yarn Market supported only by devaluation else, all factors China, India and Fabric export sale reported slow. Further price trends of yarn will be according to demand and supply of different counts which will lead price level.
• In Export Yarn Market it is expected that business activity will remain dull and slow for coming weeks due to heavy pressure on suppliers and enough stocks of yarn with customer in China.
• In Local Fabric Market slow market sentiments may continue to haunt the local fabric market in coming weeks, otherwise the consumption and demand will remain as before and lucrative for local sellers.
• In Export Fabric Market, the fareastern markets remained mixed with limited buying during the week. European markets have exchanged limited inquiries resultant limited buying. No bulk booking from USA buyers experienced. Prices for both narrow and wider width remained stable.
• The Home Textiles Market was stable and good activity reported, keeping in view the current market scenario, it seems business will be further improving if prices remain stable.
• Overall Pakistan’s garment industry is flourishing with a bright future as factories are working on their full capacities.