KARACHI: Local cotton prices have breached Rs20,000 per 40-kg level recently, coinciding with the most recent bull run in international prices where the price of the white fibre touched US 128 cents/pound on international Cotlook-A index, last week, the AKD research said on Tuesday.
The prices are expected to remain downward stick in the coming days as the harvesting season is close to culmination where the total production for this year is likely to settle around 8.5 million bales (as opposed to GoP’s target of 9.5mn bales) and the new crop will likely hit the market towards the tail end of the 3rd quarter.
The recent surge in international cotton prices comes as a result of slowdown in arrivals in India and China as the harvesting season nears culmination. The local prices of the commodity have moved in tandem and the prices have gone up by PkR2000/maund over the last week only.
Yarn margins, which have grown to 70% recently, despite a huge surge in cotton prices, have not been able to keep pace recently and the margins have squeezed to 53% recently. However, we expect most of the textile companies to have done their major buying around PkR15k/maund level and therefore the most recent increase in the commodity prices is unlikely to hit margins significantly as only sporadic buying has been seen recently.
Instead, yarn prices move with a laggard to cotton prices and therefore we expect the yarn margins to pick up in the coming days. – TLTP