Fibers & Yarns Updates (From 1st January to 31st January 2019)
1) Uncertain crop conditions, a stronger rupee and weak international prices are some of the factors that are set to push India’s cotton imports for the year 2018-19 to a record in recent years.
Trade estimates suggest India may end-up importing cotton in excess of 27 lakh bales (each of 170 kg) on the dismal crop outlook following water scarcity in the growing regions of Gujarat, Maharashtra and Karnataka.
2) With a fall in output, India’s cotton imports will rise to a record high this year. Mills will be forced to import at whatever cost to keep their factories running. Exports are also expected to shrink. However, in view of the lower crop, if exports take place as estimated, prices of domestic and imported cotton will remain firm.
3) The International Cotton Advisory Committee has predicted the average global cotton price for 2018-19 will be 86 cents per pound, lower than its earlier projection of 89 cents, on a likely decline in consumption. The current Cotlook Index A is hovering around 80 cents per pound.
4) The cotton market in Pakistan remained extremely dull and dreary on Saturday as textile spinning mills remained absent and there seemed to be little hope of any turnaround in near future.
5) China will launch options contracts for cotton on January 28, the country’s top securities regulator said on Friday.
The China Securities Regulatory Commission has given the nod to start cotton options on the Zhengzhou Commodity Exchange.
6) Demand for cotton yarn revived on the local cotton market of Pakistan on Friday in process of modest trading activity, dealers said. The official spot rate remained unchanged at PKR 8,700.
7) In India, after hitting a multi-year low last fiscal, cotton yarn spinning companies’ profit margins have improved in the December quarter due to revival in export and rupee depreciation.
8) Owing to unavailability of high-quality cotton in Pakistan, the country’s textile industry is becoming increasingly reliant on imported fibre.
The cotton imported from the United States has been greatly helping the textile industry cope with challenges such as high production costs and compliance requirements. Consequently, the cotton import from the US is rapidly increasing.
9) India’s cotton exports to Pakistan are unlikely to increase, despite the neighboring country scraping import duty, as high domestic prices have made exports uncompetitive.
Indian cotton is currently available at lower cost as compared to Pakistan. Recently, Pakistan scrapped duties on import of cotton for February 1-June 30 to tide over shortage of the crop. Indian traders, usually large exporters to Pakistan, would have benefited, but for their high procurement cost.
10) The Zhengzhou Commodity Exchange has released details on cotton options contracts and listing, with the options opened on Jan. 28.
11) The Union Cabinet on Wednesday gave its ex-post facto approval for amendment to the “Framework on Currency Swap Arrangement for SAARC Member Countries” to incorporate a ‘standby swap’ amounting to $400 million.
12) The Union textile ministry on Monday signed agreements with leading clothing/textile playes like Raymond, Welspun, Titan, Reliance Retail and the Sachin Tendulkar-promoted True Blue, under which these companies will procure more from the weavers directly.
Textile minister Smriti Irani said the initiative aims at exploring the synergy between culture and textiles and the initiative will be extended to rest of the country.
13) The unstable China-US relationship suppressed market confidence for cotton yarn in December. For Vietnamese cotton yarn, orders were at a large amount (China’s orders are centered on Vietnamese cotton yarn) and ordering price was volatile.
In December, Vietnamese cotton yarn mills are heavily burdened. Some made efforts to develop other markets and succeeded. Thus, exports to China may fall. If Chinese buyers keep ordering negatively, the price of forward Vietnamese cotton yarn may further drop.