Outlook on cotton and yarn prices – BMA Research
By: Jehanzaib Zafar,
BMA Capital Management Ltd.
According to the latest numbers released by Pakistan Cotton Ginner Association (PCGA), 13.2mn bales were sourced by the country which represents a jump of 5% compared to 12.92mn bales from the corresponding period last year.
Chinese demand for the Pakistani yarn fell towards the end of last year as the country reported huge inventory of imported yarn.
There also was a concern that the China might discontinue its procurement policy which will result in lower prices of locally produced cotton and leading to yarn production in the country.
We have put both Nishat Mills Limited (NML) and Nishat Chunian Limited (NCL) under review as we await latest reports. We will get back to our investors with new valuations shortly.
International cotton prices: A brief
Cotlook A index has on average traded around 88cents/lb in FY14 where as it oscillated around 83 cents/lb mark in corresponding period last year; a jump of 8%. Cotton prices hit their highest in nearly five months, amid 1) concerns over US inventories, and 2) growing confidence that China ‐ for now – will avoid dumping its huge stocks onto the market. On the contrary, China has decided to continue with its procuring policy for atleast another year which is likely to support the prices until the new cotton season, in the autumn of CY14.
A dossier on local cotton prices
Cotton season 2013‐14 is coming to a close and the year is likely to go out with county missing its original target of 14.5 million bales. According to the latest numbers released by Pakistan Cotton Ginner Association (PCGA), 13.2mn bales were sourced by the country which represents a jump of 5% compared to 12.92mn bales in the corresponding period last year.