Market Report – Pakistan 10th Aug 2019

Local Cotton Highlights:

• Last week, in the local market, modest trade activity was seen as needy buyers were interested in buying, while major and leading buyers were away from the buying due to the downward international trend. Kind of recession is going on due to the US-China trade war. Overall confused sentiments were observed. In this week many other sentiments were observed like shortage of the vehicle, transport issues and poor-quality issues due to hefty rains. So overall market was slow.
• Local cotton prices fell sharply during the last week, rates of cotton lost approximately Rs 300-400. The Karachi Cotton Association (KCA) spot rate (2019-2020) decreased Rs.350 and closed at level of 7750 per maund.
• The government is likely to make a final decision for the announcement of indicative price of cotton at Rs 4,000 per 40kg today (Tuesday) with an aim to control speedily declining cotton cultivation area in the country.
• ICE cotton futures slid more than 3% on Monday to their lowest in nearly three-and-a-half years on fears that escalating trade tensions between the United States and China will worsen demand for the natural fibre. The contract touched its lowest since March 2016 at 57.26 cents a lb. US President said that he would slap an extra 10% tariff on $300 billion worth of Chinese imports and would raise it further if trade talks do not progress. Cotton has fallen more than 8% since August 1 and over 20% so far this year. Chinese cotton prices closed limit down at their lowest in more than 10 years. The most active cotton contract on the Zhengzhou Commodity Exchange, for September delivery, fell the maximum 4% to end on 12,225 yuan ($1,738.95) a tonne, its lowest since march 20,2019. The Indian cotton dropped drastically in this week around 200~300 per candy.
• The government’s decision to halt trade relations with India did not have any immediate impact on the market. Textile mills have already started to explore avenues for importing long staple cotton and fine count yarn from other countries except of India.
• Phutti arrival has improved and after EID UL AZHA it seems that activity will improve and buyers will try to grab good quality cotton on lower level. In case that activity is improved then for sure local prices will also take boost up.
• Prices of seed cotton (Kapas/Phutti) for the new crop (2019-2020) in Sindh were in range from Rs 3500 to Rs 3700 per 40 Kgs and new crop phutti is available from Sindh in range from Rs 74500 to Rs 8000 per maund (37.32 Kgs).
• In Punjab prices of seed cotton was in range from Rs 3600 to Rs 3800 per 40 Kgs and new crop phutti is available from Punjab in range from Rs 7500 to Rs 8100 per maund (37.32 Kgs). Overall deals were made between the range of USC 58~63 Lbs. (7,450~8,100/ maund).

New York Cotton Futures:

• New York Cotton futures opened on lower levels on Monday as compare to previous week’s closing figures.
• NYCF somehow recovered in this week after drastic drop in previous week, only slightly dropped in last session but closed on positive side by the end of the week.

At last day of the week, OCT 2019 closed at 59.05 with increase of 114 points.

At last day of the week, DEC 2019 closed at 58.90 with rose of 42 points.

At last day of the week, MAR 2020 closed at 59.86 with upward of 14 points.

Liverpool Index:

A was opened at 73.40 with lower level from previous week’s closing figure.

• In this week Index “A” dropped in next session and closed with some recovery, at the end closed on negative side.
• At last day of the week, LPI “A” closed at 70.30 with decrease of 310 points as of opening figure of the week.

Crude Oil:

Crude Oil prices opened at USD 54.69 with lower level as compared to last week closing figures.

• In this week, crude oil prices dropped in next two consecutive sessions later rose in last two sessions, while closed on negative side at the end of week.
• In last day of the week, Crude Oil price closed at USD 54.50 with decrease of USD 0.19 cents as of opening figure of week.

Pakistan Currency Exchange Rates

• In last week values of Pak rupee apricated 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 positive note with figure of 1.13 and British Pound closed on negative note with figure 1.20 against USD.

Local Yarn:

• Local yarn market remained under sale pressure during this week and limited sales were finalized. Most of mills were interested to sell good quantity but buyers booked only urgently needed yarns and was waiting for more correction in prices after Eid Holidays.
• PSF price dropped by Rs.5/kg in domestic market dated 5^th Aug, 2019. Import fiber polyester dropped in international market which cause to drop local fiber prices. PTA, MEG price remains stable during this week, crude oil graph in International market also remained stable for this week.
• Faisalabad trading market remained close in term of sale and no yarn buying reported from mill. Some cash sale made without ID card copy but in very limited numbers.  Faisalabad based units have cut their productions and are trying to sell in register sector for some counts.

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

 Export Yarn:

• Market showed immense pressure for the whole week due to continuous slide in cotton prices. We might see further pressure in the market if cotton prices on international ground will keep dropping. This bearish sentiment has put pressure on cotton prices in domestic market and mills were forced to reduce their prices.
• At the same time, Chinese economy is trembling due to which their currency has shown depreciation.
• On the other hand, European customers are also becoming silent with such sentiment. Normally, they place handsome quantity orders before leaving for holidays but this time, order materialsation has been limited.
• So, if we analyze the situation over all, market is going through a phase of recession and this might hurt suppliers. However, now things will get clear after EID holidays in Pakistan as well as European holidays. Suppliers are quite flexible in prices and consider each and every bid to catch orders.

Local Fabric:

• In current week under review the Local fabric market sustained its bearish trend and slow activity reported throughout the week for both narrow and wider width fabric markets.
• Flow of inquiries further declined and resultantly negligible business materialization reported in the market for both narrow and wider widths fabrics. Weavers are desperate to get narrow width orders however comfortably booked in wider width looms.
• For narrow width weavers are offering 3^rd week September onward deliveries and 3^rd week October~ end October’19 onward for wider width looms

Local fabric prices of regular items are as follows:

20×16/128×60=63”at USD 1.10 to 1.12 per yard, 16×12/108×56=63” in range of USD 1.19 to 1.21 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:

• Another week went slow for Far eastern markets. Korean customers are on their summer holidays. Limited inquiries were being received from China and Bangladesh resultant limited buying during the week. Vietnam, Thailand and Indonesian markets remained mixed with limited number of inquiries.
• Prices were little bit soft due to less demand in the market. Currently good suppliers are booked till mid of Sep and offering end Sep onward deliveries whereas average suppliers are booked till early of Sep and offering mid Sep onward deliveries.
• It is expected that business activity will remain slow in the next week due to Eid holidays in all Muslim countries.

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 1.18 to 1.20 per yd and 20×20/108×5863” in range of USD 0.90 to 0.92 per yd based on CNF Far Eastern ports.

• Some of the customers are back after their summer holidays thus some suppliers have received good number of inquiries mainly from Germany, Italy and Portugal resultant limited buying both in narrow and wider width fabric.
• USA market is slow due to the holidays season. Wider width business remained mixed with limited buying by European countries. Suppliers for wider width are now offering end Oct onward deliveries mainly.
• Business activity may remain slow during next couple of weeks due to slow demand and holiday mood.

Bed Linen & Towels:

• This sector has remained good with orders floating in from both the European and the Australian region. Overall due to the holiday mood the inquiries have slowed down but before leaving the customers have placed their orders with many suppliers within the industry.
• Inquiry generation will remain slow for the next couple of weeks

Garments:

• 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. In recent time garment manufacturers have made investments in different resources enhancement areas like power generation, IT and R&D.
• Apart from this, giving easy access to the product many large-scale manufacturers have also opened up their offices in different regions of the world. With the increased demand in recent time, Pakistan’s apparel manufacturers have been catering sufficiently to the buyer’s requirements both in terms of price and deliveries.
• The industry turns out various kinds of garments for men, women, boys such as plain/embroidered/printed dresses, blouses, maxis, shirts, skirts, night dresses, track suits, middies, trousers, sub-dresses etc. Current lead time is being asked from 70 to 120 days depending upon the type of the garment.

Going Forward:

• In the Local Yarn it is expected that the market will be remain soft, and under sale pressure and business will variate from count to count and brand to brand in market. Further bulk cotton arrival will determine the price for next season and price trends of yarn will be according to demand and supply of different counts which will lead the price level.
• In Export Yarn the market remained under sluggish business activity with nominal order confirmations due to decline in prices. This has created uncertainty in prices and we might see further decline in prices in days to come.
• In Local Fabric Market we are foresing bearish market sentiments for coming weeks.
• In Export Fabric Market at the Far Eastern expectations are of slow demand due to summer holiday season. Improved business activity was seen from European countries whereas USA market remained quiet.
• In Bedding and towels market order materialization is at excellent levels but for the future the inquiries will remain slow for the month of August.
• A very flourishing and healthy wave to come for apparel industry of Pakistan as it has catered well to the buyers’ requirement in the past.