Buoyed by the surge in international prices, the cost of cotton in Pakistan has soared to a historic high of Rs15,500 per 40 kg, sparking a fresh wave of panic in the textile sector.
“Cotton futures in New York opened at 113.92 cents per pound on Wednesday morning and surpassed the threshold of $1 per pound after 10 years,” said Karachi Cotton Brokers Forum Chairman Naseem Usman while talking to The Express Tribune.
“The announcement has caused turmoil in the cotton market of Pakistan.”
He pointed out that the cotton price in Pakistan increased dramatically by Rs700-1,000 per 40 kg, adding that the price of high-quality cotton touched Rs15,000 per 40 kg in the open market while Balochi cotton was being sold for Rs15,500 per 40 kg.
“These are all-time high rates for Pakistan. Textile mills have also not been able to enter into import agreements due to soaring prices of cotton in the international market.”
On the other hand, exporters of textile products were cautious while securing export orders due to uncertainty about the cotton cost as well as volatility in the rupee-dollar parity. In addition to that, container and freight charges were also on an uptrend.
“The price rise has caused chaos in the market and textile spinners, in particular, have been hit hard,” he said. “They are unaware whether they will be able to fetch an appropriate price for their final product (cotton yarn) or not.”
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If the cost of cotton and cotton yarn surged simultaneously, the mills would buy the commodity, otherwise, they would choose not to stockpile cotton for the next several months at such a high price, he said.
Citing the lack of confidence in cotton business, the market veteran pointed out that if the international cotton price fell, the stakeholders would face extraordinary losses.
Earlier in the cotton season of 2011-12, the price of cotton futures in New York soared to a historic high of $2.26 per pound due to robust purchases by China, Usman recalled.
“At that time, cotton was being sold for Rs14,500 per 40 kg in Pakistan,” he said. “The price surge triggered a wave of bankruptcies in the textile sector as many cotton yarn producers were forced to shut down.”
He expressed concern that there were several stakeholders who benefited from the situation.
The Karachi Cotton Association on Wednesday notified an increase of Rs400 in the spot rate of cotton as it closed at Rs14,300 per 40 kg.
Published in The Express Tribune, October 7th, 2021.
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