Market Report – Pakistan 1st July 2019

Local Cotton Highlights:

• Last week, in the local market slow buying interest has been witnessed for the old crop, while for the buying of new cotton crop the trading volume increased but overall slow trends were seen. The slump in demand is expected in the trade activities within the country due to the imposition of 17 percent sales tax on textile products and 10 percent sales tax on cotton from July 1.
• The price of cotton fell around 300~400/maund during the week. The Karachi Cotton Association (KCA) spot rate dropped Rs. 300 and touched the level of 8400 per maund.
• A bearish trend was also seen in Indian cotton market while mixed trend was seen in Chinese cotton market. During the G20 meeting positive negotiations were held between Chinese and American president and it is hoped that there will be a positive impact in the coming days if things move on as perceived.
• The sowing of cotton has completed in Punjab. According to the estimates 80 lac bales will be produced in Punjab if the weather conditions remain favorable with 45 lac bales coming out of Sindh and 1 lac bales from Balochistan. Country’s total output speculated to 1 crore 25 to 26 lac with target being set to1 crore 50 lac bales.
• At the moment 25 ginning factories in Sindh have started ginning. Up till now 35 thousand bales of cotton of new crop is ready. In Punjab the arrival of Phutti has started partially and three ginning factories have started ginning. Ginners also have stocks of more than 2 lac bales from old crop.
• Prices of seed cotton (Kapas/Phutti) for the new crop (2019-2020) in Sindh were in range from Rs 3400 to Rs 3700 per 40 Kgs and new crop phutti is available from Sindh in range from Rs 7800 to Rs 8100 per maund (37.32 Kgs).
• Prices of lint for the crop (2018/2019) from Sindh & Punjab is available in range from Rs 7600 to Rs 8800 per maund (37.32 Kgs). Overall deals were made between the range of USC 60~68 Lbs. (7,800~8,800/ maund).

New York Cotton Futures:

• New York Cotton futures opened on higher level on Monday as compare to previous week’s closing figures.
• NYCF marched upward in two sessions and later showed downward trend hence closed on positive side by the end of the week.

At last day of the week, OCT 2019 closed at 65.75 with increase of 39 points.

At last day of the week, DEC 2019 closed at 66.08 with rose of 39 points.

At last day of the week, MAR 2020 closed at 66.69 with upsurge of 25 points.

Liverpool Index:

A was opened at 76.85 with lower level from previous week’s closing figure.

• In this week Index “A” dropped in next session, while increased in next week sessions and at the end closed on positive side.
• At last day of the week, LPI “A” closed at 77.20 with increase of 35 points as of opening figure of the week.

Crude Oil:

Crude Oil prices opened at USD 57.90 with higher level as compared to last week closing figures.

• In this week, crude oil prices showed mix trend in whole week and closed on positive side at the end of week.
• In last day of the week, Crude Oil price closed at USD 58.47 with increased of USD 0.57 cents as of opening figure of week.

Pakistan Currency Exchange Rates

• In last week values of Pak rupee showed downward tendency 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 1.13 and British Pound also closed on negative note with figure 1.27 against USD.

Local Yarn:

• Local yarn market started with slow business activity and limited business finalized during last week. Devaluation of Pak Rupee was down to 3~4% in beginning of last week and ended with marginal increase as compared to last 2 weeks. Most of people were busy in their lifting/dispatches before 30^th June and every mill almost cleared their closing stocks. Every mill has keen interest in July sale but limited demand notice during the week.
• PSF price jumped up Rs.7/kg dated 24^th June and next day it increased Rs.4/kg more due to Pak Rupee devaluation and ended week with 3^rd jumped for Rs.4/kg in domestic market. So overall Rs.15/kg increased during one week. PTA, MEG and Crude oil prices were firmed in international market. Import fiber prices increased in International market was a reason to increase local polyester fiber price.
• Faisalabad trading market reported nil business activity. Most of trader were covered till 30^th June and were busy in lifting to build stock in order to avoid 17% GST imposed by Federal Govt. Budget. Prices jumped up before 30^th June sales but no sale was reported for July 2019.

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

Export Yarn:

• Chinese market showed better activity in terms of orders confirmations as customers have been active in the market checking prices on regular basis. Major reason has been a positive meeting between US-China during G-20. It has been noticed that suppliers tried to take advantage of USD and sold handsome quantities at customer’s required price levels. US-China trade war is expected to go under positive developments in the coming days.
• Suppliers are getting comfortable after receiving LCs of recently sold orders and the the June pressure to dispatch stocks is also over. Hence, we might see betterment in overall activity and prices.
• European customers remained under sluggish business activity. Good level of enquiries is under discussions and we might see order materialization this week. HK customers remained on side lines and no such enquiries were received. Bangladesh customers were silent as well and no known business was materialized.

Local Fabric:

• The local fabric market remained stunned and standstill due to high volatility of Pak rupee. Buyer floated limited inquires in the market and weavers also hesitant to offer owing to lack of currency direction. Limited business materialization reported in the market at increased price level. Approximately 2%~3% price increment reported in the market.
• Major weavers are offering end July for narrow width and mid-August. Onward for wider width looms. However special looms delivery available by end August/early September on ward.

Local fabric prices of regular items are as follows:

20×16/128×60=63”at USD 1.11 to 1.13 per yard, 16×12/108×56=63” in range of USD 1.20 to 1.22 per yard and 20×20/108×58=63” was sold in range of USD 0.93 to 0.95 per yard based on ex mills.

Export Fabric:

• Mixed trading activity was seen from the Fareastern markets. Korean and Japanese customers have shown their interest in some items to book. Chinese customers have placed limited quantity of orders. Bangladesh market was active and good number of inquiries were received resultant decent quantity booking. Other markets were slow. Prices were stable although the yarn prices were not stable.
• Currently good suppliers are booked till mid of Aug whereas average suppliers are booked till end of July and offering early Aug onward deliveries.

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 1.22 to 1.24 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 had mixed demand. Germany, Italy and Portugal markets were active and booked good quantity both in narrow and wider width however other regions like France, Spain and Belgium remained slow.
• USA customers have placed their program-based orders for next quarter which they discussed last week.
• Wider width suppliers have extended their sales coverage. Good suppliers are booked till end of Aug and offering mid ~ end Sep onward deliveries. Average suppliers are offering end Aug deliveries. It is forecasted that wider width business activity will remain good in coming days and prices may remain stable.

Bed Linen & Towels:

• Bed Linen & Towels business activity has seen further improvement during last week. Customer floated handsome inquiries in the market & maturity of business has improved.
• US customers were floated good inquiries matured. European business was even better. Customers placed new orders due to fluctuation of Pakistani currency benefiting exports.
• 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:

• 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.
• 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.
• Rising monthly wages of Bangladesh garment worker in terms of US dollars are now catching up with the minimum wage in Pakistan, especially after recent Pakistani rupee devaluation.
• 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 yarn market will come under sale pressure in early-mid July due to slow buying mood from buyer and slow fabric sale activity. China Siro yarn sale-based mills are also under local sale pressure and excessive yarn supply will remain in domestic market. 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 improve in days to come on expectation of betterment in overall business activity around the globe.
• In Local Fabric Market due to the high volatility of pak rupee and limited flow of inquiries may keep market sentiments slow.
• In Export Fabric Market Fareastern side improved a little thus suppliers booked decent quantities. European markets have exchanged good number of inquiries resultant good booking both in narrow & wider width. USA market was active and booked their program-based orders for next quarter.
• In Bed Linen and Towels market it has been stable and seen good activity in the market, keeping in view current market scenario it looks as if business will further improve if prices remain stable.
• Pakistani garments industry has the capability to offer an extensive range of garments with massive volume for exports to different world markets.