Market Report – Pakistan 26th Aug 2019

Local Cotton Highlights:

• In the local cotton market during the last week, improved and better trading activity has been witnessed after long Eid ul Adha holidays. Buying trend continued during this week as spinners booked big lots amid fearing of upcoming floods following release of water by India (across the border) which may damage the crops in many parts of Punjab and new spell of rains in Sindh and Punjab are expected during next week which will drive the prices higher. It seems that activity will remain good in coming days as due to the bilateral trade suspension with India, where Pakistanis will not be able to import from India. Most of the buyers will focus on USA and Uzbekistan cotton to cover their requirements. During these days Pakistan will face the shortage of organic cotton, which is usually import only from India.
• The prices of cotton increased by PKR 200~300 during last week because of improved buying activity. While globally prices dropped due to the tension between USA & China. The Karachi Cotton Association (KCA) spot rate (2019-2020) also increased by PKR 200 and touched the level of 8000 per maund.  The ongoing US-China war is having a negative impact on the world cotton trade. ICE cotton futures fell over after weak export sales data and continued to move downward. The Chinese and Indian markets were steady amid slow trading.
• Economic indicators set off alarm bells for investors that a new global economic crisis could be at hand. Last week, the UK announced negative GDP growthfor the past quarter. This week, it’s Germany announcing shrinking GDP with its 10-year bond hitting a record negative62% yield. Then there’s Europe seeing negative industrial production, and China announcing its lowest industrial production growth in 17 years. Indeed, the Trump administration, eager to avoid a recession ahead of the 2020 election, may find itself in a position to end the trade war sooner rather than later.
• Prices of seed cotton (Kapas/Phutti) for the new crop (2019-2020) in Sindh were in range from Rs 3500 to Rs 3800 per 40 Kgs and new crop phutti is available from Sindh in range from Rs 7500 to Rs 8200 per maund (37.32 Kgs).
• In Punjab prices of seed cotton was in range from Rs 3600 to Rs 4100 per 40 Kgs and new crop phutti is available from Punjab in range from Rs 7750 to Rs 8300 per maund (37.32 Kgs). Overall deals were made between the range of USC 60~64 Lbs. (7,750~8,300/ maund).

New York Cotton Futures:

• New York Cotton futures opened on lower levels on Monday as compare to previous week’s closing figures.
• NYCF showed downward trend in this week and closed on negative side by the end of the week.

At last day of the week, OCT 2019 closed at 57.97 with decrease of 121 points.

At last day of the week, DEC 2019 closed at 58.21 with drop of 103 points.

At last day of the week, MAR 2020 closed at 59.15 with fall of 90 points.

Liverpool Index:

A was opened at 70.90 with same level from previous week’s closing figure.

• In this week Index “A” rose in next session and then dropped in next two sessions, later recovered on closing, hence closed on positive side.
• At last day of the week, LPI “A” closed at 71.20 with increase of 30 points as of opening figure of the week.

Crude Oil:

Crude Oil prices opened at USD 56.21 with higher level as compared to last week closing figures.

• In this week, crude oil price increased in next session but later dropped 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 54.17 with decrease of USD 2.04 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 1.12 and British Pound also closed on positive note with figure 1.23 against USD.

Local Yarn:

• Local yarn market remained under sale pressure during last week and limited sale finalized. Most of mills was asking same prices and were interested to sell good quantity but buyer booked only urgent required yarn and was waiting for more correction in prices due to over-supply in market.
• PSF price dropped by Rs.5/kg in domestic market dated 19^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. For next week it is also expected that price will drop more in local market.
• Faisalabad trading market remained close in term of sale and no yarn buying reported from mill in un registered sector. Some cash sale made without ID card copy but in very limited numbers.  Faisalabad based unites cut their production and 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 remained very slow for another week in a row as most of the market remained closed due to holidays. Over all prices remained under pressure due to continuous decline in cotton prices in international market. Major reason for this is trade war escalation between US-China which is putting all textile business under recession. If situation continues to escalate, prices might show further decline in days to come.
• Suppliers are interested in sales and considering every bid from customer due to cotton buying season. They are not interested to keep any stocks with them as they don’t want their funds to get stuck.
• Korean customers remained silent and no enquiry was received. HK customers just floated few enquiries for price checking but no order was reported. Chinese customers remained in the market and kept of floating enquiries. Few deals were reported where suppliers matched customer required prices. However, it seems business activity will remain slow in days to come due to another session of regulatory duties from China and US on each other. European customers were on holidays and no activity has been witnessed.

Local Fabric:

• The local fabric market remained slow but steady trend observed throughout the week for both narrow and wider width looms.
• Buyer floated limited inquires in the market. Limited business materialization reported in the market after tough negotiations at last week price level though buyers tried their best to drag the weavers down to their maximum extent.
• Major weavers are offering end September for narrow width and end October/ early November’2019 onward for wider width looms.

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:

• Far Eastern markets started picking up business activity towards end of the week with limited inquiries and buying. Some of the customers are on summer vacations and will be back next week. Limited buying was observed from China and Japan however other markets like Bangladesh, Vietnam, Thailand and Malaysia remain aside of buying during the week.
• Prices were stable with little bit soft tone as suppliers are interested to work out reasonable price target to extend their sales position. Good suppliers are booked till end of Sep and offering early ~ mid Oct onward deliveries. Average suppliers are offering end Sep onward deliveries. Suppliers are expecting slow business activity in coming days due to lean season and less demand in general.

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

20×16/128×60=63”, in range of 1.10 to 1.12 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.

• Improved business activity was observed from some of European sectors like Germany and Italy. France, Belgium, Portugal, Spanish markets still slow as most of the customers are still on holidays. No considerable buying was witnessed from USA customers as they are also on summer holidays.
• Wider width business situation is going well somehow as suppliers have booked decent quantities in the past hence, they are comfortable booked till end of Oct and now offering Nov onward deliveries. Just limited quantities are available with some suppliers for end Oct. Prices for wider width remain stable during the week. It is expected that flow of inquiry will pick up from first week of Sep however business volume may remain negligible.

Bed Linen & Towels:

• Home textile market is gradually getting better. Customers have floated good number of inquiries in the market & maturity of business has remained good as compared to the last 2-3 weeks. USA and the European markets including those of Australia floted reasonable inquiries and placed good value orders despite the holidays season.
• Home textile articles prices softened down to 2-3% as compared to the last 2-3 weeks. Suppliers have good orders in hand and almost all suppliers have 70 to 80% orders against their production facilities. As far as shipments are concerned suppliers are offering 60 to 70 days for new orders & for repeat orders supplier are offering 50 to 60 days.

Garments:

• The country’s knitwear apparel textile has shown a significant growth. By showing comparatively well performance the value-added textile category has proved that it has been the main driver of growth in the country’s overall exports. Value-added sector achieved growth because of preferential access to the 28-nation European Union under the GSP+ scheme which can further be enhanced with the government’s support.
• Pakistan direly needed to establish an aggressive Marketing Plan for garment export to get maximum benefits of GSP-Plus status.  Apparel sector can play leading role in earning foreign exchange and boosting exports. Government should establish a taskforce, especially at a time when Chinese garment industry, which has more than 30 percent share of world apparel market, is relocating.
• Factories in Pakistan are working in their full capacities and offering November deliveries. Despite devalued Pak Rupee against US Dollars which has increased the imported raw material cost, factories have not increased the prices of garment to that extent and offering a reasonable charge.

Going Forward:

• In Local Yarn Market it is expected that yarn market will be remain soft, and under sale pressure and business will be according to count to count and brand to brand in the 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 lethargic as business activity is dropping due to ageneral recession worldwide after US-CHINA trade war. So, we might see lackluster business activity in days to come.
• In the Local Fabric Market the coming weeks will predict limited flow of inquiries as the market sentiments will slow down to due falling demand.
• In Export Fabric Market the Far Eastern side improved a little with limited buying activity towards end of the week for urgent orders. European customers have started buying some quantities however bulk buying may start from early Sep onward. USA market may get active from next month.
• In Home Textiles overall market was stable, in terms of placement of good orders, keeping in view current market scenario it looks as if the business will improve if prices remain stable.
• Pakistan’s garment industry has huge potential to grow given the emerging opportunities and the support of the government.