Cotton arrivals plunge 34.5 percent in February

Category: FIBRES

Country: Pakistan

Region: Asia

By Correspondent
March 04, 2023

LAHORE: Cotton production in Pakistan dropped by 34.5 percent in February as compared to the same month last year, mainly hit by catastrophic floods last year across the country.

In Sindh, the production fell by 46.5 percent to 1.87 million bales, while in Punjab, cotton crop was in decline of 23.74 percent to 2.99 million bales, as per latest data released by the Pakistan Cotton Ginners Association as of March 1.

The decline poses a significant threat to the textile industry that consumes around 14 million cotton bales annually to operate 24/7. Some large spinners, smelling shortages, booked large orders when cotton prices were at peak. By the time the shipments arrived, the cotton prices dropped by 20-25 percent in the international market. It coincided with a deep recession in the global market.

Small spinners that operated on local supplies operated at 50 percent capacity. The larger spinners did operate 24/7 on strength of imports and local purchases.

But all spinners suffered a setback as weavers purchased a lower quantity of yarn because of recession in the global market while the export of yarn plummeted by 30 percent or more in some months. All the spinners accumulated large unsold stocks that resulted in closure of even the larger spinning mills. After closure of numerous mills the yarn stock was slowly sold.

Most of the spinners do not have quality cotton to run their mills. Those that imported cotton at lower global rates are also in trouble because as the imported cotton started arriving the central banks curtailed the quantity that could be cleared. The shipments piled up at the port. The demurrage on the non-cleared containers has been waived by the government but the shipping lines that charge heavy penalty if the containers are not returned to them after a few days refused to waive their penalties.

The cost of the penalty varies from $100 per day to $300 per day. Each cotton importer will have to pay a penalty ranging from $1500 to 4500 per container. It has nullified the advantage of lower import cost. The landed cost in fact has increased above global rates.

Spinners in Bangladesh are facing similar problems as their government also imposed restrictions because of shortage of foreign exchange. India has sufficient cotton stocks but Indian farmers managed to jack up prices by stocking harvested cotton on the rooftops of their houses. The Indian spinners also operated at 50 percent capacity for a few months but now the cotton arrivals in the market have increased and they are operating at full capacity.

Only Vietnam is in a better position as its cotton consignments are arriving on a regular basis and the mills are operating 24/7.

The debacle in Pakistan was circumstantial. Even if the cotton crop was not destroyed by floods, it would still have been 6-7 million bales shorter than industry requirements.

Cotton from neighboring India is not allowed through Wagah border that could curtail freight cost substantially. Freight these days is an important component of cost in imports. Bangladesh has recently allowed import of cotton and textile raw materials through three land ports to ease pressure on its industry. The increase in power and energy rates also impacted the viability of spinning operations.

Courtesy: https://www.thenews.com.pk/print/1046216-cotton-arrivals-plunge-34-5-percent-in-february