Indian ban on cotton exports hits Pak textile industry.

ISLAMABAD: An Indian ban on cotton exports has forced Pakistani buyers to look for alternative supplies, traders said on Thursday, and caused prices to soar and endanger the prospects of the country’s key textile industry.

Pakistani importers have booked orders for 300,000 bales in recent days, after India stopped registering new contracts for exports from April 19, to control soaring prices, said Naseem Usman, chairman of the Karachi-based Cotton Brokers Forum.

Cotton spot rates ex-Karachi were quoted at 6,800 Pakistani rupees ($80.95) per maund (37.32 kg) on Wednesday, a rise of 1,200 rupees over the past month or so, according to cotton officials. “The Indian decision has created a crisis especially for those who delayed the decision to import and now find themselves in trouble,” Usman said.

“There is sort of a panic. We need to import at least 1.5 million bales to cover needs for May, June and July.” Pakistan is the world’s fourth biggest cotton producer but often has to turn to import to feed its textile sector, which accounts for about 60% of its exports. Domestic consumption fluctuates between 14 and 16 million bales a year.

With an estimated 12.70 million bales from the 2009/10 crop, Pakistan faces a shortfall of about 3 million bales, and was relying heavily on neighbouring India to meet much of its needs until late-July, when the new crop will start arriving. Pakistani millers with no cover for the next 2-3 months were now buying from other sources such as West Africa, Central Asia and the US , dealers said.

Most supplies would likely come from West Africa, which is still attractive price-wise, another trader, Ayub Usman, said from Faisalabad, a city known as Pakistan’s textile capital.

“There is certainly a panic-like situation as the local stock of about 100,000 bales will only last for days and my estimate is that some 25 to 30 mills will have to shut down until the start of supplies from the new crop,” he said. “World supplies have become very tight as sellers know Pakistan is in a difficult position and will be willing to pay at whatever rates they demand.”

World 2009/10 cotton ending stocks will slump almost 20 per cent year-on-year because of lower output in top consumer China and increased consumption in India and Turkey among others, according to influential industry analyst Cotlook.

Some Pakistani millers say the country will need to import up to 2.5 million bales in the next three months because about 800,000 bales have been exported. With no bar on exports, growers also sell their output in the international market to fetch better prices, meaning more has to be imported.

Pakistan had until the end of March imported a little more than 1 million bales, most from India. Naseem Usman said Pakistan bought roughly 750,000 bales from India and about 200,000 bales were still to be shipped before India, the world’s second biggest cotton exporter, imposed the ban. But he said that reports suggested India had asked its exporters to re-register all their valid cotton sale contracts done before the ban to allow their shipment. “We are hoping that orders placed before the ban will be released soon.”

Source : The Economic Times