World cotton consumption may be constrained on dull economic conditions

In the local market, cotton prices remained depressed on increasing seed-cotton arrivals in ginneries. Rain-affected lint cotton of Lower Sindh was selling at Rs 5,500 while sound cotton of Upper Sindh and of good stations of Punjab at Rs 6,500-6.700 per maund ex-gin. Lint cotton from Mianwali station is fetching highest rate among others due to high quality.

Pakistan is reported to have sold some more than 166,000 bales of raw cotton in export mostly to China. Peak arrivals of seed cotton are expected in next month (November-11) and heavy cotton arrivals may squeeze cotton market in late November to December month when money market would become tight in view of closing of calendar year 2011 and increased loadshedding of power and gas specially in Punjab.

In January month, China may slacken its cotton purchases / imports after meeting its obligatory import quota of calendar year 2011 under WTO. The celebration of three week long holidays on Christmas and New year (20th December-11 to 10th January-12) occasions in most parts of the world especially West would make cotton market almost standstill.

The expected stimulation in Pakistan's political activities in December-11 and onward would slowdown economic and industrial activities. These factors may jointly exert pressure on cotton market and prices may come down around the level of Rs 5,000 for average quality cotton. The Government of Pakistan has plan to levy one percent turn-over tax on all textile sectors which may put the main foreign exchange contributing sector to new trouble. This one percent levy will be above one quarter percent Export Development Tax already levied on all textile sectors.

The recent increase of about 15 percent in electricity charges would increase production cost and make exports uncompetitive. On international front, sovereign credit crisis in Euro Zone and budgetary financial problems in USA and imbalance currency problems in China, and Japan may jeopardise economic activities in the world especially in West. The recent wide spread demonstrations and agitations of so called poor people against rich people in Europe and US are feared to engulf sores of countries the world over jeopardising the economic and industrial growth.