Domestic Cotton Prices still On Surge

Market Intelligence

Domestic Cotton Prices still On Surge

Cotton

Indian cotton prices continued to surge in the second half of December despite the ongoing peak marketing season. Spot prices were up INR 1,100-4,000 per candy during the fortnight, with benchmark Shankar-6 traded at INR 40,400 per candy. Daily arrivals were still restricted to around 1.50 lakh bales in a period where they usually exceed 2.25 lakh bales. This was pushing spinning mills into panic buying as holding back of crop will boost prices later. Also, crop production is likely to be smaller than anticipated due to pest attack in major cotton growing state of Maharashtra.

Global spot benchmark, Cotlook A index jumped US cents 3.90 to notch a three-month high at US cents 88.60 per pound.

US Cotton futures on the ICE hovered close to seven-month highs as sustained speculative demand helped March contract gain for nine straight weeks. Cotton contracts for March settled at US cents 77.87 per pound after matching all-time high for the contract at US cents 78.07 per pound before the fortnight. The surge was due to combination of spec and trade buying continued to chase values higher, expert stated also adding that the current bull run had little to do with cotton availability, but was more to the result of mills having accumulated a record amount of unfixed on-call sales.

In China, spot cotton market showed some improvement on the back of the surge in imports, but prices remained slightly low. Xinjiang-origin grade-3128 cotton in Henan were quoted at RMB 15640-15730 per metric ton (US cents 108 per pound). Meanwhile, the China Cotton Index moderated 121 Yuan to 15,721 Yuan per metric ton.

In Pakistan, buyers sought all grades of cotton during the second half of December which kept physical prices firm and forward deals fortified their long positions. The KCA rate gained PakRs 400 at PakRs 7,145 per maund. Meanwhile, cotton imports from India will be delayed due to procedural delays and issuance of permits that are valid from 1 January, cotton import will take off then.

Cotton Yarn

Cotton yarn markets were active in India and Pakistan were prices jumped on support of firming cotton while in China they were slightly weak in amid moderating transactions. Cotton yarn 16s was offered at RMB 15.20 per kg (US$ 2.31 per kg) and 32s at RMB 23.10 per kg (US$ 3.51 a kg) in Shengze. In Pakistan, cotton yarn prices began moving up sharply on the domestic market, due to fresh surge in cotton cost in the past few weeks. Cotton import prices have also sharply increased due to the surge of international prices and the fall of the PakRe. In Faisalabad, 32s cotton combed yarn rose PakRs 6-8.5 to PakRs 145-162.50 per pound (US$ 2.89-3.24 per kg, up US cents 2-8). In India, 30s combed cotton yarn for knitting were at INR 192 a kg (US$ 3.00 per kg, up US cents 3 while export offers jumped another US cents 7 to US$ 3.12 a kg.